Stock-Split Watch: Is Nvidia Next?

Nvidia (NASDAQ: NVDA) stock splits have become a clear sign of the stock's strength in the world of artificial intelligence (AI). Its AI accelerators have arguably made it the most essential AI stock. Its transformational power over the chip industry allowed it to replace the former industry leader Intel as one of the 30 stocks making up the Dow Jones Industrial Average (DJINDICES: ^DJI) in November 2024.

But does that mean it has grown to the point that investors should expect it to become the next major stock split? Let's take a closer look.

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The recent stock split history of Nvidia

Nvidia stock benefited from early successes in its history. The company launched an IPO in 1999 at the height of the dot-com boom. Even as that bull market ran its course, Nvidia stock grew steadily, prompting four stock splits between 2000 and 2007.

However, Nvidia peaked in 2007 and experienced a massive decline during the 2008 financial crisis. Even though the stock began its recovery in early 2009, it would take until 2016 before Nvidia returned to its 2007 highs.

2016 was when Nvidia released the GeForce 10 graphics processing unit (GPU), and this GPU dramatically improved the quality of virtual reality rendering. This improvement sparked a rally in Nvidia stock, making it a leader in data center chips and, eventually, in AI accelerators.

Massive stock gains prompted a 4-for-1 stock split in July 2021. After the 2022 bear market ran its course, another boom in the stock started in October 2022 and accelerated in the spring of 2023, when investors discovered that Nvidia's AI accelerators powered the latest version of ChatGPT. That run led to a 10-for-1 stock split in June 2024.

In the time between the 2007 and 2024 stock splits, Nvidia rose by almost 14,000%!

NVDA data by YCharts.

Is another split forthcoming?

However, amid those gains, the prospects for another stock split in the near term look surprisingly dim.

For one, Nvidia has returned a comparatively lackluster performance since the June 2024 stock split. Since that time, the stock has risen by about 15%. While that closely reflects the returns of the S&P 500 (SNPINDEX: ^GSPC), it may disappoint investors accustomed to Nvidia's massive growth over the last 10 years.

Additionally, Nvidia is unlikely to face pressure to split its stock at this time from S&P Dow Jones Indices, the committee run by S&P Global. The Dow is a price-weighted average, meaning a stock's nominal price determines how much it influences the index.

Still, only seven of the 30 stocks on the index sell for a lower nominal share price than Nvidia. That means that Nvidia is currently one of the less influential stocks on the index and, thus, is unlikely to face pressure from S&P Dow Jones to initiate a split. Likewise, splitting the stock now would diminish its influence over the Dow, making it unlikely to initiate a split independently.

Moreover, one often-ignored factor makes a split for any reason highly improbable -- the market cap. Its market cap makes it the second most valuable publicly traded stock, next to Apple.

This means that if Nvidia waited for another 10-fold move higher and initiated a 10-for-1 split, it would have to achieve a market cap of $34 trillion. With no stock having reached a $4 trillion market cap as of the time of this writing, a $34 trillion market cap is unlikely any time in the near future.

Do not expect an Nvidia stock split

Considering the state of Nvidia stock, investors should not expect it to become the next stock split, nor should they expect a split in the foreseeable future.

Admittedly, Nvidia stock has delivered eye-popping returns since the release of the GeForce 10, which changed the face of the company. Nonetheless, Nvidia has already addressed its nominal stock price by two splits that made one share in 2016 the equivalent of 40 shares today.

Consequently, Nvidia is now one of the lower-priced stocks of the Dow 30, and its massive size makes another split highly unlikely. Thus, future stock splits should not be an issue for Nvidia for a long time to come, if ever.

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Will Healy has positions in Intel. The Motley Fool has positions in and recommends Apple, Intel, Nvidia, and S&P Global. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.