NVIDIA Stock After 3-Month Split: Buy, Hold, or Sell?

NVIDIA Corporation NVDA was a top performer on the S&P 500 in 2023 and continued its upward trend this year due to its dominance in the artificial intelligence (AI) chip market.

However, NVIDIA’s stock price exceeded $1,000 in early 2024, making it unaffordable for many investors. Therefore, the company started a stock split in early June. Let’s take a look at NVIDIA’s performance post-split to determine its current investment potential.

NVIDIA stock price performance – positive even after stock split

In May, NVIDIA announced its intention to split its stock 1:10. Immediately after the announcement, the stock price rose from around $900 to over $1,000. Between this announcement and the split date (Friday, June 7th), NVIDIA’s stock price soared approximately 30%. It opened at about $120 on June 10 after the split, and is now trading at about $123, an increase of more than 2%.

NVIDIA stock has historically increased in value two out of three times in the three months following a stock split. A Statista report using Bank of America Corporation’s BAC data found that companies that split their stock had an average return of more than 25% in the 12 months following the split, double the average return of the S&P 500 over the same period. It became.

NVIDIA stock price rises due to Fed rate cut

After the split, NVIDIA stock rose as the Federal Reserve cut interest rates. The Fed cut interest rates by 50 basis points to support economic growth. The Federal Reserve eased monetary policy for the first time in four years.

Lower interest rates are expected to reduce NVIDIA’s borrowing costs and improve profit margins. Lower interest rates will not impact NVIDIA’s cash flow needed to support growth initiatives.

Going back to the 1990s, NVIDIA stock rose an average of 20.7% in the 12 months following a rate cut, while the S&P 500 rose only 2.9%, according to Dow Jones Market Data.

Important Tailwinds for NVIDIA Stock

Its dominance in the graphics processing unit (GPU) market, shipments of its most popular Blackwell chips by the end of the year, and significant growth in the AI market also boosted NVIDIA stock.

NVIDIA’s CUDA software platform is more widely used than Advanced Micro Devices, Inc.’s AMD ROCm software platform and has a larger share of the GPU market, which Precedence estimates will grow to 75.77 billion in 2024. It is projected to reach $1,414.39 billion by 2034. the study.

Meanwhile, CEO Jensen Huang asserted that high-end Blackwell chips will be launched soon to meet high demand. This is because Blackwell chips have higher AI throughput than current Hopper chips.

A recent report from Bain Technology estimates that the AI hardware and software market will grow from approximately $185 billion this year to $990 billion by 2027, with major cloud companies considering significant investments in AI. Concerns about the situation were dispelled.

NVIDIA is benefiting from the AI boom as a leading hardware and technology provider for AI applications. Revenue from government sovereign AI investments is expected to be $10 billion in 2024, a significant increase from zero last year, according to a Bain Technology report.

Strong fundamentals driving NVIDIA stock price

NVIDIA is able to generate profits well and manage costs efficiently, which could lead to a higher stock price in the future based on its return on equity (ROE) and net profit margin.

NVIDIA’s ROE is 120%, which is higher than the Semiconductor General industry’s 73.2%. A number greater than 100% indicates that a company’s net income exceeds its equity.