Nvidia may be an interesting stock, but like most stock splits, a 10-for-1 stock split is nothing.

If you don’t know much about the field giant semiconductor nvidia (NASDAQ: NVDA), is worth learning about as the company has recently had great success in the field of artificial intelligence (AI). Nvidia is often in the news, most recently with its 10:1 stock split that has intrigued many investors.

But most stock splits, including this one, aren’t as exciting as they seem. Before dealing with the stock split, the company Nvidia is exciting. The stock performance certainly looks like this:

Data source: Morningstar.com, as of June 3, 2024.

That’s a striking number. A 50% annual return will increase your investment by more than 437 times over 15 years! If you’ve only owned Nvidia over the past five years, the value of your stake would have doubled every year on average.

The reason Nvidia’s stock performance is interesting is because its underlying business is interesting. Over the years, Nvidia has grown from a gaming chip specialist to a company that now derives most of its revenue from gaming chips. data center technology. This is because as the spread of artificial intelligence (AI) rapidly increases, more and more semiconductor firepower is required.

Check out some more interesting numbers from Nvidia:

Data source: Morningstar.com.

Nvidia’s first quarter fiscal 2025 revenue increased a whopping 262% year-over-year! And as artificial intelligence fuels further growth in data centers, total revenue over the past 12 months reached nearly $80 billion. (In fact, AI may even fuel further growth for Nvidia’s gaming business.)

Nvidia’s stock split isn’t that exciting.

Despite the justified enthusiasm for Nvidia and its stock, the excitement over the 10-for-1 stock split (which occurred on June 7) is misplaced. As of June 3, the stock has surged more than 20% since the company reported impressive first-quarter results and announced a stock split on May 22.

What is a stock split?

A stock split increases the number of shares while simultaneously reducing the value of each share proportionally. The typical split formula is 2:1, so you get two shares for every share you owned before the split, and the stock price is cut in half. But let’s see what happens with Nvidia’s split.

Imagine you own 10 shares of Nvidia stock at a price of $1,160 per share before the split. The total value of your shares is $11,600. If the stock splits, you end up with 100 shares. But the stock price will suddenly be about a tenth of its previous price. That’s about $116 per share. 100 shares multiplied by the $116 price gives a total value of $11,600.

The story continues

Stock splits are mostly accounting events and are nothing to most investors. However, in some cases, as in this case, a split can raise the stock price to a level suitable for more investors. With Nvidia stock costing more than $1,100 before the split, many people probably thought they couldn’t afford the stock for a penny.

What is a reverse stock split?

It’s worth noting that reverse stock splits also exist, which makes a bit more sense since they’re typically performed by struggling companies. Reverse splits help boost the price of a stock, preventing it from being delisted from stock exchanges and keeping it from looking like a risky penny stock.

If Nvidia executes a 1:10 reverse split, your 10 shares will become 1 share, which is approximately 10 times the shares traded before the split. Again, the total value does not change.

Should you buy Nvidia stock?

Stock split aside, the question most people have about Nvidia is: Is it too late to buy stock now?

There is no one answer to that question that is right for everyone, and opinions will generally differ on stock valuation. Many people see Nvidia’s stock as overvalued at recent levels, and that’s fair. For example, its recent price-to-sales ratio was 36, well above its five-year average of 19.

However, considering how quickly the business is growing, it’s also reasonable to believe that the seemingly steep valuation may not be so absurd. (Note that it has been overrated for years.)

So, learn more about the company and crunch the numbers for yourself. If you plan to buy and hold for a long time, buying now may be a smart move. Even if there is a downturn in the near term, the company has a lot of long-term growth potential. But if you are risk averse or afraid of volatility, look elsewhere.

Should you invest $1,000 in Nvidia right now?

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Selena Maranjian I have a position at Nvidia. The Motley Fool has a position at and recommends Nvidia. All kinds of idiots Disclosure Policy.

Nvidia may be an interesting stock, but like most stock splits, a 10-for-1 stock split is nothing. Originally published by The Motley Fool.