Nvidia

When Nvidia announced its stock split, the stock price rose 20% within two months. In 2021, Nvidia conducted a 4-for-1 stock split, reducing its stock price from around $600 per share to approximately $150 per share. Due to the company's success in recent years, the management decided to split the stock again. In the latest earnings conference call, Nvidia announced a 10-for-1 stock split, reducing its stock price from $1000 per share to $100 per share. This split will take effect on June 10th. Many people, including myself, have anticipated this split. Stock split announcements often lead to a significant increase in stock price in the weeks leading up to the split. Last time, Nvidia's stock price increased by 20% between the announcement and the effective date.
In the recent earnings conference call, Nvidia announced a 10-for-1 stock split, reducing its stock price from $1000 per share to $100 per share. This split will take effect on June 10th. Many people, including myself, have anticipated this split. Stock split announcements often lead to a significant increase in stock price in the weeks leading up to the split. Last time, Nvidia's stock price increased by 20% between the announcement and the effective date.

I have three reasons to support my decision to purchase and hold Nvidia stock.
1. Datacenter revenue growth shows no signs of slowing down.
Nvidia's main product is the Graphics Processing Unit (GPU), which is used for processing complex tasks such as training artificial intelligence (AI) models. In the past year, the demand for AI has surged, driving the stock price to new highs. Nvidia's datacenter division saw a 427% year-on-year increase in revenue in the first quarter of the 2024 fiscal year (ending on April 28th). It also grew by 23% compared to the previous quarter, indicating that the demand for AI computing continues to grow. Nvidia expects second quarter revenue to be around $28 billion, a 107% year-on-year increase and an 8% increase compared to the previous quarter. Although the growth may seem to be slowing down, the company often exceeds expectations. The target for the first quarter was $24 billion, but the actual revenue was $26 billion. According to CEO Jensen Huang, "The next industrial revolution has already begun, and businesses and countries are partnering with Nvidia to transform traditional datacenters into new AI factories for producing artificial intelligence."
2. The valuation of stocks is not as high as you might think.
Despite its success, many people have avoided NVIDIA due to valuation issues. Prior to announcing its first-quarter performance, the forward P/E ratio of NVIDIA was 35 times, lower than Microsoft's 36 times, and NVIDIA's growth was even faster. NVIDIA is transforming an industry, and valuation issues are secondary.
3. NVIDIA's dividends are growing.
In its financial report, NVIDIA also announced a 150% increase in dividends. Previously, the quarterly dividend was $0.04 per share, with a yield of 0.016%. After the increase, calculated after the split, the new quarterly dividend is $0.01 per share, with a yield of 0.04%. Although not high, it lays the foundation for larger payments in the future. Currently, the management believes that reinvesting cash flow into the business is more valuable than paying dividends, and this strategy has been proven to be correct.

In summary, stock splits themselves are only superficial phenomena with limited impact. The real reason to buy NVIDIA stocks lies in the continued growth and potential of its business, not the announcement of a split. If you buy stocks now and benefit from the short-term increase due to the announcement, you will profit from it. However, in the long run, the above three reasons are more influential.

* Purely personal opinions and sharing...