Did NVIDIA plummet by over 20% after the stock split?

Short-term movements in US stocks are always elusive, and when market volatility increases, especially during downturns, investors tend to seek stability from sector leaders who have historically outperformed the S&P 500 stock price index. FAANG stocks have been supported by investors for many years, but companies that carry out stock splits tend to attract attention during periods of high uncertainty.

A stock split is understood as an event where a company adjusts the stock price and number of issued shares at the same ratio, and it is a cosmetic phenomenon that does not have a significant impact on the total market value or performance of a company.

There are two types of stock splits: forward splits and reverse splits. A sequential stock split lowers the nominal stock price of an enterprise and makes it easier for individual investors who cannot purchase fractional shares to buy them. Conversely, the purpose of a stock merger (reverse split) is to raise a company's stock price so that it satisfies minimum listing continuity standards on major stock exchanges.

There are also cases where stock mergers (reverse splits) are successful, but most investors are paying attention to companies that carry out forward splits. Such companies usually surpass other companies in the same industry in terms of innovation and execution, and are the type of enterprise that is expected to outperform over the long term.

However, not all Wall Street observers believe that stock prices will continue to rise even after the stock split.

DA Davidson analyst Gil Luria (Gil Luria) predicts that NVIDIA's stock price will reach 900 dollars. If this were the target price a year ago, Luria would be regarded as one of Wall Street's most optimistic analysts. However,The closing price of NVIDIA shares on 5/29 was just over $1,148, which means that the best-performing megacap since early 2023 is likely to fall 22%.

NVIDIA's H100 graphics processing unit (GPU) is favored in data centers accelerated by AI, and brings price determination power and a remarkably high gross profit margin, but competition is unavoidable. Intel (INTC.US) is scheduled to announce the AI accelerator chip “Gaudi 3” in the 3rd quarter, and AMD (AMD.US) is increasing production of MI300X GPUs to compete with NVIDIA's H100 chips.

History also seems to be predicting the future of NVIDIA. There have been no large-scale investments that have escaped the burst of the bubble in the past 30 years. Despite the promise of AI, its initial introduction and spread may be more difficult than investors expected. If the AI bubble bursts, no company will be hit as hard as NVIDIA.