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US stocks fall ahead of big week on Wall Street
Nvidia (NVDA) shares began trading on Monday on a new 10-for-1 split basis. This means one share of the AI giant went from Friday’s closing price of $1,208.88 to $1,208.88. $120.88. Shares fell about 2% shortly after the opening bell.
Dan Howley and Josh Schafer of Yahoo Finance report:
The split means that owners of Nvidia common stock held at market close on Thursday received 10 shares for every share they held. For example, if a shareholder owned four shares of Nvidia on Thursday, they will now own 40 shares after the split.
Stock splits make stock ownership more affordable by reducing the price of individual shares without diluting the value of existing shareholders’ total holdings.
“The stock split will make Nvidia much more accessible to many of these retail traders,” Matt Amberson of Option Research & Technology Services told Yahoo Finance last Thursday. “Now, you rarely see a stock above $1,000 with 50% implied volatility, so option prices are extraordinarily high, so options traders are really looking forward to the split.”
Nvidia split comes after company’s full market valuation briefly eclipsed $3 trillion on Wednesdaypushing the chip company past Apple and becoming the second most valuable publicly traded company in the US.
Nvidia shares have soared thanks to the explosion of interest in generative AI that began when OpenAI released its ChatGPT software in late 2021. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, Google) and Microsoft (MSFT) have been struggling to get their hands on Nvidia hardware to power their own generative AI platforms.
Stock splits are seen by investors as a sign of strength, and consequently, companies that split their shares typically outperform the S&P 500 in the year following their announcement.
On average, shares rise 25% in the 12 months following a split announcement, compared with an average return of 12% for the S&P 500 over the same period, according to Bank of America analysis. This has been true “across market regimes,” wrote Jared Woodard, investment and ETF strategist at BofA, in a note to clients.
Notably, the trend includes the period from 2000 to 2009, amid the unfolding of the technology bubble. Since Nvidia announced its split on May 22, shares have risen about 27%.