When Nvidia last announced its stock split, its share price rose 20% in two months. In 2021, Nvidia carried out a 4-split 1 share split, reducing its price of $600 per share to around $150. Due to the company's success over the past few years, management decided to split the shares again.
At a recent earnings conference, Nvidia announced a 10-split 1 share split, reducing its price of $1,000 per share to $100. The split will take effect on June 10. Many people, including me, have already anticipated this split. Stock split announcements often trigger a sharp rise in stock prices within a few weeks before the split takes effect. Last time, Nvidia's stock price increased 20% between the announcement and the effective date.
I gave myself three reasons to support this decision to buy and hold Nvidia shares for the long term.
1. Data center revenue growth is not slowing down
Nvidia's main product is a graphics processing unit (GPU), which is suitable for processing complex tasks such as artificial intelligence (AI) model training. In the past year, demand for AI was at an all-time high, driving stock prices to new highs. Nvidia's data center division's revenue for the first quarter of fiscal year 2024 (ending April 28) increased 427% year over year. The increase was 23% month-on-month, indicating that demand for AI computing is still growing. Nvidia expects revenue for the second quarter to be around $28 billion, an increase of 107% year over year and an increase of 8% month on month. Although growth seems to be slowing down, the company often exceeds expectations. The target for the first quarter is 24 billion US dollars. Actually...