Let’s get this over with right up front. Yes, Nvidia is splitting. But no, it’s not splitting up. You see, the biggest name in artificial intelligence (AI) announced earnings earlier this week and stunned investors with blowout sales, massive profits, and a surprise 10-for-1 stock split. Shares immediately shot up and through $1,000 (just like I predicted they would). So today, I want to talk a little bit about that Nvidia stock split. Because it could turn out to be one of the most exciting parts of the earnings report…
The Amazon of AI
But first, before we talk about the Nvidia stock split, we’ve got to go back to 2022 when Amazon stock was trading above $1,000 as well. (Don’t worry. When I finish, you’ll understand why Amazon’s history tells us something about the Nvidia stock split.) You see, Amazon had also split its stock several times in the past (as has Nvidia). But its revenues and earnings just kept growing (also like Nvidia). And investors had bid its price up above $1,000 yet again. So on June 6, 2022, the company announced another stock split to make its shares accessible to more investors. The split brought the price down and made the shares “look” more affordable. And investors loved it. They bought more and drove prices up again. But that stock split had an unforeseen side effect that’s still bringing profits to Amazon and its shareholders.
And to see that, we have to fast-forward a little less than two years to February 20, 2024. That’s the date that Amazon was added to the Dow Jones Industrial Average. That addition made the company a constituent of all three major benchmarks: the Nasdaq, the S&P 500, and the Dow 30. And it also drove even more investors toward Amazon’s stock. And that, my friend, brings us back to the Nvidia stock split and why you should be excited…
Nvidia Stock Split Sets up Dow Inclusion
You see, unlike the Nasdaq and S&P 500 indexes, there are no real rules for what companies get to be included in the Dow. The Nasdaq and S&P have quantitative requirements the stocks must meet. They must have a certain share price, a certain number of investors, a certain amount of trading activity, etc. But the Dow selection criteria are more art than science. To be honest, there might even be some mysticism in there too…
The only real quantifiable credential components MUST have is that they’re already in the S&P 500. Other than that, it’s kind of up to the discretion of the “board.” But, that being said, that board does not add stocks with share prices above $1,000. Hard stop. None of the 30 Dow stocks trade that high on an individual basis. So at $1,000 a share, Amazon didn’t have a shot. And neither does Nvidia. But the Nvidia stock split will bring that price down to a much more reasonable price of about $100 per share. And that, like the youngest bear’s porridge, is just right for the Dow decision-makers.
Nvidia Stock Split + DJIA = BIG Deal
And the reason you should care about all this information, and especially about the Nvidia stock split, is that potential Dow inclusion. You see, Nvidia already met all of the other “criteria” for inclusion. The only quantifiable one, S&P 500 inclusion, has been true for years. It’s also one of the biggest American companies by market cap. It’s not a transportation company, either. And the plurality of its profits do come from the United States. So there’s really no reason at all that Nvidia’s shares don’t make it into the Dow Jones after the stock split.
When (not if) that happens, Nvidia will be a component of all three major benchmarks. And any money manager using those benchmarks for comparison will have to buy more shares of Nvidia. But that’s not all… After the Nvidia stock split and Dow 30 inclusion, there will also be forced buying by all those companies out there running exchange-traded funds (or ETFs) that track the Dow. Every single passive Dow index ETF will have to buy enough shares of Nvidia to match the index. Combined, that’s a lot of buying pressure that could send shares up a lot when it hits. And that’s why you (and every investor) should not just care, but be excited about the Nvidia stock split.
The Bottom Line on the Nvidia Stock Split
The bottom line here is that the artificial intelligence (AI) bull market is nowhere near over and is likely just beginning. The Nvidia stock split and blowout earnings are just going to add fuel to the fire. And with Nvidia such a HUGE part of the U.S. economy, there’s no reason it shouldn’t be part of the Dow 30. When that inclusion happens, fund managers are going to have to buy Nvidia stock no matter if they want to or not. And that’s going to create a lot of upward pressure on the already highly prized shares. Getting in before that happens could set investors up to reap the profits and make Wall Street pay a high price for those shares, even after this Nvidia stock split.
So go take a look at the market and maybe get yourself some Nvidia shares before all that buying pressure hits. And definitely keep coming back here to Wealth Daily every day to make sure you’re staying on top of all the trending market news AND make sure you’re ahead of the curve when it comes to the next investments the market will start chasing.
To your wealth, Jason Williams After graduating Cum Laude in finance
and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private
sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team
responsible for billions of dollars in daily trading. Jason left Wall Street to found his own
investment office and now shares the strategies he used and the network he built with you. Jason
is the founder of Main Street
Ventures, a pre-IPO investment newsletter; the founder of
Future Giants, a nano cap investing service; and authors The Wealth Advisory income stock
newsletter. He is also the managing editor of Wealth
Daily. To learn more about Jason, click here. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on. 
@TheReal_JayDubs
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