Stock-Split Watch: Is Nvidia (NVDA) Next?

Yahoo

2 days ago

Key Points
Nvidia has split its stock six times, most recently 10-for-1 in June 2024.
The current stock price is well below previous split-launching highs.
Long-term value for Nvidia investors comes from its leadership in AI, not stock splits.
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Semiconductor designer Nvidia (NASDAQ: NVDA) has split its stock six times so far, including a splashy 10-for-1 split in June 2024. The shares are climbing to new highs again with a market cap of $4.34 trillion.
Will Nvidia announce another split before the end of 2025? Let's have a look.
Nvidia's business is booming
First and foremost, a stock split wouldn't make sense if the company were in financial trouble. That's a pretty academic concern here, though. As the leading supplier of high-performance artificial intelligence (AI) accelerators, Nvidia is enjoying a golden age.
Its trailing revenue has soared 354% higher over the last two years to $148.5 billion. Nvidia converted $72.1 billion of those beefy sales into free cash flow over the last year. That's up from $5.1 billion two years ago.
And many experts expect its booming business to stay strong for years. Rivals such as Advanced Micro Devices (NASDAQ: AMD) and Cerebras have developed competitive AI chips, but Nvidia's solutions quickly emerged as an industry standard.
Surging data center construction around the world suggests that the market leader will see plenty of AI chip orders in the coming years. Ergo, Nvidia is doing quite all right, and some would argue that the stock is undervalued today.
Why Nvidia's next split isn't around the corner
A technical issue makes it clear that Nvidia won't execute the next stock split in 2025. These moves need approval, usually by a passing vote at the company's annual meeting of shareholders. That ship sailed on June 25.
Management could call a special meeting just to consider a stock split proposal, but honestly, it's not that big of a deal. Hold that thought -- I'll explain what I mean in a minute.
All right, but would it make any sense to lower the share price with another split someday soon? The stock is trading at nearly $180, having gained 46% since last year's big split.
But the stock soared all the way to $1,200 per share before Nvidia reorganized its stock offering in 2024. Before that, it cost a split-adjusted $740 around the time of the 4-for-1 split in July 2021.
A 46% gain is impressive, especially when starting from a market-cap launchpad worth $3 trillion. But it's a long way to go from $180 to $1,200, or even to the lower $740 range.
Judging by Nvidia's earlier split announcements, I'd be surprised to see another stock split in the next year or two. That's true even if the stock price keeps rising 46% per year.
Stock splits in 2025: More hype than wealth-building substance
As noted earlier, stock splits aren't a big deal. They used to be, when stocks had to be traded in round lots of 100 shares. But that requirement was scrapped in 2007, and most brokerages allow trading of fractional shares nowadays. The concept of hugely expensive round lots is nearly as outdated as stock quotes in fractions of a dollar (not seen since 2001), and the real-world value of stock splits disappeared when these changes were made.
Splits are still great headline fodder in 2025, and you can see them as the board of directors issuing a vote of confidence for future price gains. But the split itself neither boosts nor hurts the stock price or total market value. You're just cutting Nvidia's $4.34 trillion of shareholder value into a different number of equal shares: 10 shares worth $176 each is exactly the same as 40 shares priced at $44.
So don't worry too much about Nvidia's stock-splitting plans. It's not likely to happen soon, and it's not a game-changing event if it takes this accounting step. Just keep an eye on the evolving AI boom to make sure the chipmaker hangs on to its dominant market share.
That's where the real shareholder value comes from, after all.
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Anders Bylund has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
Stock-Split Watch: Is Nvidia (NVDA) Next? was originally published by The Motley Fool