There is a possibility that individual investors will increase due to NVIDIA's stock split

NVIDIA, a major chip maker and a major player in the artificial intelligence industry, announced that it will split 1 share into 10 shares in response to a drastic rise in stock prices. The announcement came along with a strong quarterly report showing earnings and forecasts beating analysts' expectations, and the company's stock rose 10% on Thursday afternoon.

This move follows the division of 1 share into 4 shares in mid-2021, and this is the second stock split in the past few years. The current decision by NVIDIA, which is the third-largest company in the United States in terms of market capitalization, is expected to be an opportunity to further attract individual investors who generally have low transaction volume compared to institutional investors. There is a possibility that the stock price per share will drop due to the stock split, making it easier for individual investors with limited funds to access it.

Since NVIDIA stands out in the AI field, it has already gained considerable support among individual investors, and the company's stock accounts for 9.3% of the largest weight in an average individual trading portfolio. However, according to recent data, the inflow of individual traders into NVIDIA is slowing down.

While falling stock prices are attractive, market experts emphasize that stock splits do not change the fundamental value of a company. The purpose of this split, which will be implemented on 6/7, is to increase the possibility of stock ownership for employees and investors without changing the value of existing investments.

Historically, companies that announced stock splits tend to outperform the market, and BofA Global Research points out that the average stock price increase rate for the next 12 months was 25.4%. Nonetheless, external factors can also influence stock price performance, as seen in Amazon and Alphabet, where stock prices fell after the split was announced amid rising interest rates.

Due to this stock split, NVIDIA is in an advantageous position where there is a possibility that it will be adopted by the Dow Jones Industrial Average. After the split, there is a possibility that Nvidia's adjusted stock price will line up more closely with other Dow constituent stocks, leading to speculation similar to Amazon joining the Dow earlier this year.

The S&P Dow Jones Index did not comment on the possibility of index changes, but NVIDIA's reputation, growth potential, and sector representation are in line with Dow's inclusion standards. There is a possibility that the upcoming stock split will simplify the process, and NVIDIA is a strong candidate for an excellent stock index.
The possibility of NVIDIA's stock split and incorporation into Dow will continue in the future.
Investing.com editor Brando Bricchi