Will Nvidia announce an upcoming stock split? The financial industry is full of speculation about this. Is it possible for stock splits to occur? How will the stock price react? Let's interpret Nvidia and see if there is any truth behind the stock split hype.
Firstly, as of February 29, 2024, Nvidia has not yet released an official statement announcing the possibility of a stock split. Due to Nvidia's history of stock splits, there has been a continuous stream of media hype. The last stock split occurred on July 19, 2021, with a stock price of $751.
It is said that stock splits can provide more retail investors with the opportunity to acquire stocks, as lower stock prices can attract investors who may not be able to purchase the entire stock at the pre split price. This is the official statement that everyone is using, but it is not the most convincing explanation.
Do you think it's credible that Nvidia, with a market value of $21 trillion, went through a stock split in order to allow those who can't afford $780 to buy a small portion of Nvidia's stock?
But this does not mean that you should avoid trading Nvidia stocks. NVIDIA is at the forefront of artificial intelligence development, and for this California based company, its future is brighter than ever before. In addition, Nvidia has many other reasons to conduct a stock split. Even the current fragile economy is supporting Nvidia's stock split.
So, yes, although the current stock split speculation is unfounded, stock splits may still become a reality. If that's really the case, what would happen?
What impact does Nvidia's stock split have on prices
Although stock splits can be an exciting or volatile moment for traders, please remember that stock splits themselves do not change the fundamental value of a company. Stock splits only increase the number of existing stocks and correspondingly decrease the value per share.
NVIDIA's current stock price is at a historical high, but traders typically choose to buy at low levels and sell at high levels. Stock splits may create a false impression of a buyer's market, but in reality, the company's financial health, competitive landscape, management team, and prospects have not changed at all.
Therefore, if you believe that NVDA's current price is too high or overbought, then a stock worth $195 divided by four is still an overbought asset. For some traders, Nvidia stock priced at less than $200 per share may sound attractive, but in reality, its price is still high.
Any bullish market reaction to rumors or even announcements of stock splits is purely an emotional response of market participants. No matter what rebound or plunge occurs, it is usually just a flash in the pan and will soon be corrected. Don't be misled by speculation about stock splits, evaluate the company and what changes have occurred.
Although stock splits can bring short-term excitement and trading activity, don't let it affect your judgment. Pay attention to due diligence and fundamental analysis to make wise investment decisions.
Nvidia has a bright future in the thriving technology field, especially considering its strong position in artificial intelligence and gaming, so sustained growth is not surprising. However, growth is not guaranteed, as the global economy may have unforeseeable consequences, even the strongest bull market can be impacted.
If you are unsure of the entry point, remember the "buy low, sell high" mnemonic used by several generations of traders, and then ask yourself, is NVIDIA's current stock price low or high?