Investing

Forget NVIDIA Stock Split: 1 Reason It Is Still a Buy

Jacob Wolinsky

Published: August 5, 2024 9:36 am

Article Key Points

• In June the company completed a 10-for-1 stock split. 
• NVIDIA’s market value has more than doubled in the last decade.
• f you’re looking for some stocks with huge potential that could be fantastic “buy the dip” opportunities, make sure to grab a free copy of our brand-new “The Next NVIDIA” report.

Shares of NVIDIA (NASDAQ: NVDA) have surged by more than 450% in the last two years and added approximately 116% since the beginning of 2024. As excitement surrounding artificial intelligence (AI) continues to gain momentum, the Santa Clara-based company is now standing at the forefront of digital and artificial innovation. 

In June 2024, the company announced a 10-for-1 stock split, allowing them to increase the number of outstanding shares while making prices more affordable for smaller investors. 

NVIDIA’s Stock Split Explained

NVIDIA’s stock split is more common than you might think. This isn’t the first time the company has completed a stock split. This helps to increase the number of shares for existing shareholders and bolster liquidity. 

NVIDIA’s stock split is none different compared to other companies that have done the same in the past. Tech leaders such as Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), and Google Inc. (NASDAQ: GOOGL) are among those companies that often complete stock splits.

In theory, the stock split doesn’t necessarily create economic value, but allows companies to maintain their market value while making share purchasing more accessible to smaller investors. 

Why NVIDIA Is A Strong Buy 

After completing the stock split on June 10, NVIDIA continues to remain on investors’ radar.

The company is spearheading the digital and graphics processing unit (GPU) market by developing advanced processing units that are being used to power the next generation of AI technology. 

Following the stock split, NVDA shares rose nearly 11%, but have fallen by approximately 15%, between July 10 and August 1.

Despite stock prices being on a downward trend, the company is a competitive leader, and even in a market dominated by other players such as Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC), NVIDIA is a strong buy for investors looking to hold a long-term growth stock that can deliver adequate returns and remain at the top of the market. 

Technological leadership

The introduction of the RTX 30 series GPUs with better standards in graphics performance, ray tracing, and AI capabilities has made NVIDIA’s GPUs the go-to choice for gamers, content creators, and professionals in various fields.

This is only a small piece of the wider puzzle. During the company’s recent call to shareholders, the founder and CEO of NVIDIA, Jensen Huang, said, “The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence.”

NVIDIA is working on developing new systems that will help it expand its revenue opportunities, and provide more cost-effective solutions to its biggest partners.

Strong financial performance

Another sub-reason why NVIDIA stocks are a “must buy” is because of their top-notch financial position. With their recent acquisitions and partnerships, the company is guaranteed to make a fortune in revenue in the coming years. 

For the fiscal year 2024, NVIDIA reported quarterly revenue of $26.0 billion, an increase of 18% from the previous quarter and a 262% improvement year-over-year (YoY). Furthermore, the company reported data center revenue of $22.6 billion, an improvement of 23% from the previous quarter and up 427% YoY. 

In the same fiscal year, NVIDIA reported a strong GAAP earnings per share (EPS) of $5.98, which was an improvement of 21% quarter over quarter (QoQ) and a strong gain of 629% compared to the same period last year. 

Leading the AI boom 

NVIDIA has become an AI darling for Wall Street investors. The company continues to capitalize on the expansion of artificial intelligence, most importantly through its GPU hardware which has played an important role in powering generative AI. 

Over the last several years, the company has managed to boost its market value from $1.2 trillion to over $3 trillion. This massive improvement has given the company significant support on the stock market, being one of the biggest half-year and full-year performance winners on the S&P. 

While the stock split made NVIDIA more accessible, the primary reason to invest lies in its dominance in AI and data centers. Innovative technologies, strategic partnerships, and robust financial performance position NVIDIA for continued growth and success.