NVIDIA Corporation (NVDA)a prominent force in the artificial intelligence and semiconductor technology industries, announced a 10-for-1 forward stock split of the company’s common stock during the latest earnings announcement in May. Shareholders of record on June 6th received nine additional shares for each share held after the close on Friday, June 7th. Trading will begin on a split-adjusted basis at the market open on June 10.
This strategic move is poised to reshape the landscape for Nvidia investors and the broader tech market.
Valuation after break-up
NVDA was already the market’s top AI stock, but investor interest in the chipmaker soared as the 10-for-1 stock split took effect after the market closed on June 7. Shares of the hottest stock in the S&P 500 jumped tenfold on Friday after its long-awaited stock split.
Additionally, NVIDIA stock has gained more than 158% over the past six months and nearly 222% over the past year. Specifically, the stock has risen more than 3,222% over the past five years. During this remarkable run, Nvidia’s market cap of about $3 trillion surpassed that of Amazon (AMZN) and Alphabet Inc. (GOOGL). Before the 10-for-1 split, the stock was trading at $1,209.
The chip giant’s strategic decision to split its shares follows a broader trend among tech giants to make owning their shares more accessible and attractive to retail investors. With more individual investors gaining access to Nvidia stock following the split, there is increased trading activity and demand, potentially boosting share prices.
According to data from BofA research, total returns for companies announcing stock splits are about 25% in the 12 months following a stock split historically versus 12% gains for the S&P 500. Thus, stock splits are seen as a bullish signal, often accompanied by positive investor sentiment and increased buying activity.
Solid earnings and a healthy outlook
The stock split isn’t the only reason for NVDA’s latest rally. The company also reported better-than-expected revenue and profit in the first quarter of fiscal 2025 due to strong demand for its artificial intelligence chips. During the quarter ending April 28, 2024, Nvidia’s revenue rose 262% year over year to $26.04 billion. That beat the consensus revenue estimate of $24.59 billion.
The company’s largest business unit, Data Center, which includes the AI chips and many additional components needed to run large AI servers, reported record revenue of $22.60 billion, up 427% year over year.
“Our data center growth has been fueled by strong and accelerating demand for genetic AI training and inference on the Hopper platform. Beyond cloud service providers, genetic AI has expanded to consumer Internet companies and enterprise, mainstream AI, automotive and healthcare customers, creating multiple multi-billion dollar vertical markets,” said Jensen Huang, founder and CEO of NVDA.
“We are ready for our next wave of growth. The Blackwell platform is in full production and is the foundation for trillion-parameter generative AI,” Huang added. During a call with analysts, the CEO said that there will be significant Blackwell revenue this year and that the new chip will be deployed in data centers by the fourth quarter.
The chipmaker’s non-GAAP gross profit rose 328.2% from the year-ago quarter to $20.56 billion. NVDA’s non-GAAP operating income was $18.06 billion, up 491.7% year over year. Non-GAAP net income rose 461.7% year-over-year to $15.24 billion. It also posted non-GAAP EPS of $6.12, compared to analysts’ estimate of $5.58, and grew 461.5% year-over-year.
Additionally, NVIDIA’s cash, cash equivalents and marketable securities were $31.44 billion as of April 28, 2024, compared to $25.98 billion as of January 28, 2024.
In its Q2 2025 outlook, the company expects revenue to be $28 billion, plus or minus 2%. Non-GAAP gross margin is expected to be 75.5%, plus or minus 50 basis points. NVDA’s non-GAAP operating expenses are expected to be approximately $2.8 billion.
Increased Dividends
NVDA increased its dividend payments to reward shareholders and show confidence in its financial strength and growth prospects. The company increased its quarterly cash dividend by 150% from $0.04 per share to $0.10 per share of common stock. The dividend is equivalent to $0.01 per share on a post-split basis and will be paid on June 28 to all shareholders of record on June 11.
While Nvidia’s dividend yield is modest compared to its tech peers, its substantial cash flow and strong balance sheet provide plenty of room for growth.
Dominance in the AI and data center markets is fueling unprecedented growth opportunities
NVDA is strategically positioned at the forefront of the AI and data center markets, with high demand for AI chips for data processing, education and inference from major cloud service providers, GPU specialists, enterprise software and consumer Internet companies. Additionally, vertical industries, led by automotive, financial services, and healthcare, drive demand.
Statista predicts that the genetic artificial intelligence (GenAI) market will reach $36.06 billion by 2024, with the US accounting for the largest market size at $11.66 billion. Additionally, the GenAI market is expected to total $356.10 billion by 2030, expanding at a CAGR of 46.5% from 2024 to 2030.
Over the past year, Nvidia has seen significant sales growth due to strong demand from tech giants such as Google, Microsoft Corporation (MSFT), Meta Platforms, Inc. (META), Amazon and OpenAI, which have invested billions of dollars in Nvidia’s advanced GPUs that are essential to the development and deployment of AI applications. In January, META announced a pretty big one order of 350,000 high-end H100 graphics cards from Nvidia.
As a result, NVDA keeps a market share around 92% in the data center GPU market for artificial intelligence applications.
Conclusion
NVDA’s recent 10-for-1 stock split has significantly impacted its valuation and market appeal. This strategic move not only made Nvidia shares more accessible to retail investors, but also fueled increased trading activity and demand, driving share prices higher. The stock rose tenfold on Friday when the stock split took effect, reflecting heightened investor interest.
NVIDIA’s strong financial performance, as evidenced by its fiscal 2025 Q1 report, further strengthens its position in the AI and data center market. The company reported a threefold increase in revenue, driven by huge demand for AI processors from major tech companies including Microsoft, Meta, Amazon, Google and OpenAI.
The chipmaker’s remarkable growth has propelled it to the world’s third-largest market capitalization, surpassing peers such as AMZN and META.
Additionally, the company’s revenue and EPS for the fiscal year ending January 2025 are expected to grow 97.9% and 108.9% year-over-year to $120.55 billion and $27.07 billion, respectively. For fiscal 2026, analysts expect revenue and EPS to grow 32.4% and 32.6% year over year to $159.55 billion and $35.90 billion, respectively. With a healthy outlook for the future, NVDA continues to attract investors looking for long-term growth opportunities.
Additionally, the recent decision to increase dividends by 150% shows NVDA’s confidence in its financial strength and growth prospects, making it more attractive to income-oriented investors. This move, combined with the stock split, appeals to different investor demographics and reflects NVDA’s commitment to rewarding shareholders while positioning itself for future growth in the artificial intelligence and semiconductor sectors.