Nvidia’s 10-for-1 stock split to attract ordinary investors has taken effect, generating debate over its Dow index membership
The objective of the split is to reduce the per-share value to make it more affordable for employees and investors.
Consequently, the company’s outstanding shares increase without affecting its market valuation.
Ben Laidler, global markets strategist at digital brokerage eToro, stated that Nvidia’s stock split could propel it into the Dow, where it would compete with Amazon and Apple. Currently, Intel holds the lowest weight.
The stock experienced a 0.2% decline on Monday, following a nearly 27% increase since the company reported a strong forecast and a share split last month. Also last week, the preeminent AI chip manufacturer achieved a market value of $3 trillion, surpassing Apple to become the second-most valuable company in the world, trailing only Microsoft.
“Historically, when we observe runs such as this leading to a split, there is frequently a hangover effect that follows. I anticipate that buyer exhaustion will occur this week,” stated Dennis Dick, market structure analyst at Triple D Trading, regarding Nvidia shares.
According to market analysts, stock splits are more likely to appeal to individual investors, who trade in smaller quantities and have less capital to deploy than institutional investors.
However, according to a note by Goldman Sachs strategists under David Kostin’s direction, the most recent stock splits have yet to increase retail trading activity significantly. However, there have been some notable exceptions, including the 2022 split of Amazon and the 2021 split of Nvidia.
Additionally, “investors typically assign higher valuations to liquid stocks because of their low trading costs and flexibility in various market environments,” according to the researchers.
According to Goldman’s analysis of 45 Russell 1000 stock splits since 2019, trading volumes have momentarily increased following stock split announcements. Still, there has been minimal change during and after the splits took effect over the past several years.
Nvidia’s stock last traded at $120 per share post-split, down from $1,200 on Friday. This suggests it could be a contender for the 30-member price-weighted Dow index.
An S&P In late May, a spokesperson for Dow Jones Indices stated that the company does not provide commentary or speculation regarding index additions or deletions.