Anticipated: Nvidia’s Next Major Strategic Move

Anticipated: Nvidia’s Next Major Strategic Move

Nvidia (NASDAQ:NVDA) has been a real mover and shaker in recent years. The company has become the world’s leading designer of artificial intelligence (AI) chips, holding 80% of the market. And that has translated into a meteoric rise in profits, with both revenue and net profit soaring by triple digits last year. And Nvidia continues to innovate, recently announcing the upcoming launch of a new chip architecture – the Blackwell platform – and its most powerful chips ever.

This tech company isn’t one to sit idly by, so it’s only natural that investors like to try to predict its next big move. And now I’m going to jump in and share my prediction on what we could expect next from Nvidia. I’ll give you a hint: the company’s shares have exceeded a level that, in the past, coincided with a key decision.

Anticipated: Nvidia’s Next Major Strategic Move

Image source: Getty Images.

Record Nvidia stock price

Nvidia shares have soared more than 240% over the past year, taking the company’s market value to $2.2 trillion, and today trade at an all-time high of more than $900. In May 2021, when its shares were trading at around $700, Nvidia announced a 4-for-1 stock split and aimed to gain approval at its June annual meeting.

I predict this scenario could play out again this spring – with a potential announcement during the company’s next earnings report in May – as Nvidia prepares for its next shareholders’ meeting. This will probably take place in June if we consider the calendars of previous years.

Why do I think Nvidia will make the move soon? For several reasons. First, as mentioned, Nvidia’s last stock split occurred when the company’s stock price reached similar levels. Thus, the company is known to announce such an operation after significant gains and while the stock was approaching $1,000.

Second, a stock price close to $1,000 or more makes it difficult for some investors to seize the investment opportunity. Of course, fractional shares exist, but some brokerages don’t offer them, and in some cases investors prefer to buy whole shares. Additionally, other investors may be concerned that even if the valuation looks good, a stock will still struggle to move significantly higher once it hits thousands of dollars – which could make them hesitate before buying a stock. stock at $900.

By splitting its shares, a company erases all of these problems, opening the door to a wider range of investors.

Next, it’s important to keep in mind that Nvidia has completed five stock splits in the past, meaning the company is open to this type of action. The first splits occurred between 2000 and 2007.

How a stock split would affect Nvidia

Now let’s see how a possible split would work and the impact it could have on the performance of Nvidia stock. During a split, a company offers additional shares to current shareholders to lower the price of each individual share, while keeping the market value as is. The resulting stock price is determined by the split ratio, whether it’s 4-to-1 like Nvidia’s most recent deal or a different proportion.

If you are a current shareholder, the value of your investment will remain the same, but you will end up with additional shares.

Stock splits themselves are not catalysts for stock price performance, so I’m not counting on a potential Nvidia stock split to drive the stock higher. To use the past as an example, Nvidia stock did not immediately rise following the 2021 stock split. The shares did, however, rise later that year, but did so on fundamentals, such as gains in income.

NVDA ChartNVDA Chart

NVDA Chart

That said, a stock split, by making shares more accessible to a wide range of investors, could encourage more of them to consider the stock rather than opt for cheaper players. This is positive in the long term, but it does not lead to sudden increases in stock prices.

So I predict that now is the time for Nvidia to split its shares, and this could be the company’s next big move. But it doesn’t matter whether you buy the stock today or after a potential split: Either way, you could win by participating in this great long-term AI story.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool has a disclosure policy.

Prediction: This will be Nvidia’s next big move was originally published by The Motley Fool

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