Nvidia’s market value has exploded, surpassing $3 trillion and propelling the chipmaker past Apple to become the world’s second-most valuable publicly traded company.
Demand for Nvidia shares shows no signs of slowing down. Despite years of dizzying gains, investors continue to flock in, seemingly unfazed by the soaring share price.
This relentless rise can be attributed in large part to Nvidia’s dominant position in the burgeoning artificial intelligence (AI) sector.
Imagine $10,000 turning into $2 million – that’s the magic of compound interest that has worked for Nvidia investors over the past decade.
No other company in the world comes close to this phenomenal growth. In fact, the entire index is only up 177% over the same period.
The question therefore arises whether the stock can continue to recover from current levels. Below we’ll look at 5 key catalysts that could continue to fuel the stock’s upside over the medium to long term.
1. Increase in dividends
Nvidia recently announced a 150% dividend increase. However, the current yield remains very low, around 0.4-0.5%, making it a minor advantage compared to massive capital appreciation. In fact, more than 400 S&P 500 companies offer a higher dividend yield.
2. An AI chip pipeline for continued dominance
Nvidia is strategically planning its future with the upcoming launch of next-generation AI chips. The company intends to release annual updates to its AI accelerators, with the Blackwell Ultra chip planned for 2025 and the Rubin platform for 2026. This proactive approach builds investor confidence in Nvidia’s ability to maintain its impressive growth trajectory beyond the current financial year.
3. Explosive revenue and profit growth
Nvidia saw a staggering 260% year-over-year increase in revenue, reaching $26 billion. Earnings per share also exceeded expectations, coming in at $6.12 compared to market expectations of $5.65. This translates to a profit of $14.881 billion, a significant increase of 21% from the previous quarter and a staggering 628% year-over-year jump.
4. Upward revision of revenue forecasts for the second quarter
Nvidia further boosted investor confidence by raising its second-quarter revenue forecast to $28 billion, beating analysts’ estimates of $26.8 billion.
5. Upcoming Share Division
This week, Nvidia will conduct a stock split, distributing 9 new shares for every share currently owned. This split will take effect at the close of trading on Friday and the new shares will begin trading on Monday June 10. To be eligible for the split, investors must own Nvidia shares by the June 6 deadline.
Nvidia Stock Split: What You Need to Know
This Friday, Nvidia is splitting its shares. This means that the company will increase the number of shares outstanding while reducing their individual value.
Stock splits do not change the overall value of a company. However, they can make the stock more attractive to investors in several ways:
- Psychology: A lower stock price can attract more investors, especially those with smaller portfolios.
- Accessibility: Now, investors with less capital can afford to purchase entire shares of Nvidia, allowing for better diversification of portfolios.
- Liquidity: A lower stock price often leads to more frequent trading, which increases the liquidity of the stock.
A stock split involves reducing the value of a company’s stock and increasing the number of shares outstanding.
In other words, during a split, the share capital and equity of the company remain the same, but the number of shares outstanding is increased while the par value of these shares is reduced, but the shareholders retain the same proportion.
How might the stock price react to the split?
Although a split does not in itself guarantee a share price increase, Bank of America (NYSE:) reports an average increase of 25% for companies in the year following a split. However, long-term performance depends on business fundamentals and overall market conditions.
Nvidia will soon enter the Dow Jones?
Nvidia’s upcoming stock split could pave the way for its inclusion in the .
The Dow Jones, made up of only 30 blue-chip companies, sees little change (only 7 in the last 15 years). Inclusion and removal are based on a strict set of criteria.
If Nvidia can be considered one of the fastest growing American companies, its high share price (around $1,140) exceeds an essential criterion. The DJIA limits the price of the most expensive stock to ten times that of the cheapest stock.
The upcoming stock split will remove this hurdle, paving the way for Nvidia to enter the Dow Jones and meet all of the index’s inclusion criteria.
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Warning : This article is written for informational purposes only; it does not constitute a solicitation, offer, opinion, advice or investment recommendation and is not intended to encourage the purchase of assets in any manner whatsoever. I want to remind you that any type of asset is evaluated from multiple angles and carries high risk. Therefore, any investment decision and the risk associated with it lies with the investor.
