Semiconductor
firm
Nvidia (NVDA) announced
a
10-for-1
stock
split
along
with
its
blowout
first-quarter
earnings
results
on
Wednesday.
The
stock
split
means
investors
will
receive
nine
additional
shares
for
each
one
they
already
own.
“The
split
is
reasonable
since
the
stock
price
has
appreciated
so
significantly,”
says
Morningstar
technology
equity
strategist Brian
Colello.
Nvidia
shares
are
up
more
than
90%
this
year
and
more
than
200%
over
the
past
12
months,
as
the
company
has
boomed
thanks
to
the
key
role
its
semiconductor
chips
play
in
training
and
running
artificial
intelligence
models.
It
now
trades
at
over
$1,000
per
share,
while
it
went
for
$495
at
the
end
of
2023.
The
stock
was
changing
hands
near
$305
per
share
in
May
2023,
just
before
the
firm
reported
blowout
earnings
that
kicked
off
the
AI
stock
frenzy.
The
firm’s
last
stock
split
was
in
July
2021,
when
it
issued
three
new
shares
for
every
one
outstanding
(a
four-for-one
split).
The
Date
for
Nvidia’s
Stock
Split
According
to
the
company’s press
release,
the
split
is
slated
to
occur
after
the
stock
market’s
close
on
June
7.
Shares
will
trade
on
a
post-split
basis
starting
June
10.
Colello
raised
his
fair
value
estimate
for
Nvidia
stock
from
$910
to
$1,050
following
the
company’s
first-quarter
results,
which
saw
revenue
of
$26
billion,
an
18%
increase
over
the
previous
quarter
and
a
262%
increase
over
the
year-ago
quarter.
What
Nvidia’s
Stock
Split
Means
While
the
split
will
increase
the
number
of
outstanding
shares
in
circulation,
it
will
not
change
the
company’s
overall
value
or
affect
Morningstar’s
view
of
its
stock.
“Splitting
the
stock
shouldn’t
create
economic
value
in
theory,
but
it
will
make
the
company
more
accessible
to
smaller
investors,”
Colello
explains.
While
$500
isn’t
enough
to
buy
a
single
share
of
Nvidia
today,
he
explains,
it
will
be
enough
to
buy
several
shares
after
the
split.
After
the
split,
Nvidia’s
fair
value
estimate
will
be
adjusted
to
$105.
The
firm’s
wide
economic
moat
rating
will
be
unaffected,
as
will
its
3-star
rating
(meaning
the
stock
is
considered
fairly
valued)
and
very
high
uncertainty
rating.
Nvidia’s
AI
Boom
The
firm’s
first-quarter
earnings
show
it
“remains
the
clear
winner
in
the
race
to
build
out
generative
artificial
intelligence
capabilities,”
Colello
writes.
“We’re
encouraged
by
management’s
commentary
that
demand
for
its
upcoming
Blackwell
products
should
exceed
supply
into
calendar
2025,
and
we
see
no
signs
of
AI
demand
slowing
either.”
Colello
is
looking
ahead
to
strong
revenue
growth
from
data
centres
over
the
next
several
quarters,
and
he
expects
additional
growth
from
a
higher
installed
base
of
AI
equipment.
He
is
anticipating
revenue
of
$29.7
billion
in
the
next
quarter,
slightly
more
than
Nvidia’s
estimate.
For
now
at
least,
Colello
doesn’t
believe
that
the
rush
of
companies
buying
Nvidia’s
chips
will
stall
out.
Nvidia’s
production
is
still
well
matched
to
demands
from
customers,
he
says,
although
it
is
a
risk
that
bears
watching.
“Given
Nvidia’s
astronomical
growth,
we
continue
to
assess
the
risk
of
companies
buying
too
many
AI
GPUs
too
soon,
leading
to
an
air
pocket
and
excess
inventory
at
some
point
in
the
future.
We
see
no
such
signs
today,”
he
writes.
Why
Do
Companies
Split
Their
Stock?
When
a
company
splits
its
stock,
each
share
gets
divided
into
multiple
new
shares.
While
this
increases
the
number
of
outstanding
shares,
it
does
not
change
the
company’s
overall
value
(its
market
capitalisation).
Firms
tend
to
do
this
when
their
share
price
has
risen
dramatically
to
an
amount
that
might
make
it
difficult
for
individual
investors
to
purchase
them.
Having
a
larger
number
of
cheaper
shares
to
attract
more
buyers
can
help
improve
liquidity,
and
lower
prices
can
also
have
the
psychological
impact
of
making
shares
look
more
attractive
to
investors,
even
though
the
company’s
underlying
value
hasn’t
changed.
Other
Recent
Stock
Splits
Nvidia
isn’t
the
only
major
company
to
split
its
shares
in
recent
years.
Retail
giant
Walmart (WMT) enacted
a 3-for-1
split in
February,
while
Alphabet (GOOGL/GOOG),
Tesla (TSLA),
and
Amazon (AMZN) split
shares
in
2022.
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