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Here’s what experts expect will happen with the Nvidia stock split

Nvidia is one of the hottest stocks out there, but the chipmaker is going through a major shift: The company that is almost single-handedly powering the current generative AI revolution is set to split its stock by a factor of 10-to-1.

The split will take place today and will involve shareholders in the computer chip maker, whose GPUs are competing with companies including OpenAI and Elon Musk’s xAI, in order to further their generative AI goals, seeing how many shares they own multiply by 10, although… The value should remain approximately the same.

“Companies often do stock splits to make their shares more accessible to a wider range of investors,” says Sam North, market analyst at investment platform eToro. “When a stock price rises too much, it may become difficult for some investors to buy full shares.” Nvidia fits this bill perfectly, having undergone… 3,200% increase in stock price In the past five years.

“When a stock’s price rises per share, it can seem expensive to small investors, and a stock split lowers the price by increasing the number of shares, making it psychologically more attractive,” says Kate Lehman, senior market analyst at AvaTrade. Lehman points out that stock splits are often seen as a sign of a company’s strength because they indicate that the stock price has been doing well.

Executives need to carefully consider the trade-offs between the pros and cons that could be ensured by a stock split. “They must weigh the potential benefits, such as increased liquidity and a broader ownership base, against the costs of implementing the split,” Lehman says. “The decision typically involves evaluating whether the split is consistent with the company’s long-term strategy.”

The reason you should think carefully about what to do is because the risks are high. There are risks involved with such a large change, and stock splits can sometimes backfire. “For example, the stock price may not recover to its pre-split level, and it may not attract new investors as hoped,” North says. “There are also costs associated with implementing a stock split, including administrative and regulatory expenses.” However, this is not Nvidia’s first stock split, and both North and Leaman believe the company will likely emerge from the transition stronger, not weaker.

But Nvidia is taking measures to ensure that even small risks of something going wrong are avoided as much as possible. “In addition to the split, Nvidia is also increasing its quarterly dividend by 150%, which will now be about 1 cent per share after the split,” Lehman says. “This increase is another way Nvidia is trying to attract more investors by offering a better return on their investment.”

And the precedent is on their side. “Historically, well-performing companies that have gone through stock splits often see continued growth in their stock prices, provided they maintain strong operating and financial performance,” North says. With the AI ​​sector still in the midst of a full-blown boom, it seems likely that Nvidia’s stock split will encourage other everyday investors to jump in — pushing the stock price higher.


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