The split increases the number of outstanding shares of the firm without altering the stock's worth, with the goal of decreasing the per-share value to make it more accessible for investors and workers.
With Nvidia's 10-for-1 stock split now in force, talk over the artificial intelligence bellwether's potential inclusion in the blue-chip Dow index has increased. The split was intended to attract individual investors.
The split raises the number of outstanding shares of the firm without affecting the stock's worth. Its goal is to decrease the per-share value to make it more accessible for investors and workers.
According to Ben Laidler, global markets analyst at digital brokerage eToro, "a side-effect of Nvidia's divided shares will be to put it in the running to follow Amazon and Apple's stocks into the Dow, which could drive out fellow chip stock Intel that currently has the lowest weighting."
Monday's premarket trading saw a 0.5% decline in the stock, which had risen by about 27% since the company's announcement of the share split and a positive outlook last month. The market-dominant manufacturer of AI chips has also secured a $3 trillion market value, surpassing Apple to rank as the world's second-most valuable company, behind only Microsoft.
According to market experts, individual investors who trade in smaller amounts and have less money to deploy than institutional investors are more drawn to stock splits.
Although there have been some noteworthy outliers, such as Amazon's split in 2022 and Nvidia's split in 2021, most previous stock splits have not resulted in a major rise in retail trading activity, according to a report from Goldman Sachs analysts headed by David Kostin.
Additionally, "investors typically assign higher valuations to liquid stocks as a consequence of their low trading costs and flexibility in a variety of market environments" , according to the strategists.
According to Goldman's examination of 45 Russell 1000 company splits since 2019, trade volumes have temporarily surged after stock split announcements during the last several years, but they have not changed much during or after the splits took place.
After splitting, Nvidia's stock was last trading at $120 per share, down from $1,200 on Friday. This suggests that Nvidia might be a candidate for the 30-member price-weighted Dow index.
Late in May, a representative for S&P Dow Jones Indices said that the company does not discuss or make assumptions about changes to the index.
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