Nvidia 10-for-1 Stock Split (NVDA) Comes After Close, Ex Dividend Date Looms

Nvidia (NASDAQ: NVDA) is set to execute a 10-for-1 stock split after the market closes today, with the resumption of trading on Monday set to reflect the change. The stock will also go ex-dividend the following day, Tuesday 11th June. NVDA shares have added 7.59% over the past week in the buildup to sit above $1200, but after hitting that barrier, tailed off slightly in yesterday's session (-1.14%).

Shareholders of record are poised to receive nine additional shares for every share they currently own or a multiple of 10x. The decision for the split follows a remarkable trajectory in Nvidia's stock price, which has witnessed returns of 223% in the past year and an impressive 3000% increase over the last five years. This performance is largely attributed to the burgeoning enthusiasm around artificial intelligence (AI), a sector where Nvidia has established dominance.

Whilst stock splits are usually meant to make the price more affordable, and therefore bring about an increase in demand, and therefore share value, this has not historically been the case at Nvidia. The most recent stock split at NVDA was back on July 20, 2021 and was followed by a 4% reduction in price over the 12 months that followed.

Historically, following its stock splits, Nvidia has seen its stock price decrease by an average of 23% within the following 12 months and by about 3% after a 24-month period. While past performance can serve as a reference, it's not necessarily indicative of future outcomes. Investors contemplating Nvidia's prospects should consider several key factors influencing the company's path forward.

One of the paramount factors is Nvidia's ability to continue expanding its revenue and earnings, especially within the AI industry. The first quarter results were promising, as Nvidia reported a staggering 262% increase in revenue, amounting to $26 billion. This surge was fueled primarily by robust growth in data center sales. Moreover, the projected annual growth rate for AI hardware, software, and services is estimated at 36.6% through to 2030, which could serve as a powerful tailwind for the company.

Wall Street analysts are optimistic about Nvidia's growth potential, with earnings per share anticipated to expand at an annual rate of 38% over the next three to five years. Despite a high price-to-earnings (P/E) ratio of 70.92, shares of Nvidia are considered to be trading at a relatively attractive valuation, given a price/earnings to growth (PEG) ratio of 0.97, which is below the typical market average.

An important viewpoint comes from Morgan Stanley analyst Joseph Moore, who underscores Nvidia's crucial role in the AI industry. He suggests that amid the extreme excitement for AI technologies, Nvidia remains an essential investment for individuals looking to gain exposure to this cutting-edge sector. Considering all these factors, Nvidia's strategic positioning in AI and its financial performance seem to pave a promising road ahead for the company.

While the historical trend following its stock splits indicates potential for a price decline, in buy the rumour sell the news fashion, the overwhelming growth in the AI market and Nvidia's strong performance may well set a different course. As market observers look toward the future, Nvidia's innovative edge in AI and consistent growth in revenue and earnings remain critical elements that will likely influence the direction of its stock price post-split.