After the U.S. stock market closed on Friday, June 7,$NVIDIA (NVDA.US)$Each shareholder will receive 9 additional shares for each share they hold.
Plot setting.
For Nvidia's stock split, the market has long set up a stock price movement scenario: most investors believe that the stock price will rise before the split is implemented, and after the stock split is realized, the stock price is likely to fall. Currently, Nvidia's trend also follows this pattern. The company's stock price set a new historical high this week, pushing Nvidia's market cap over $3 trillion.
Nvidia's high stock price is pushing the limits of stock market valuation. Based on the latest market prices, it now ranks among the top ten stocks in the world in terms of market cap.
Monday, June 10th will be the first day of Nvidia's stock split adjustment trading.
High-stakes game at a high stock price.
After a stock split, some investors may think that the stock price is more affordable and decide to buy, which increases demand and thus drives up the stock price. For example, when Nvidia executed a 1-for-20 stock split in 2022, the stock price rose in the days following the split.$Amazon (AMZN.US)$Stock splits can also signal to the market that a company's stock price has risen enough to justify the split, and investors may believe that this growth will continue in the future.
According to research from Bank of America, "historically, stock splits have been positive for companies that implement them, rising 25% one year later, compared to a 12% increase in the broader market."
This split may also trigger Nvidia's addition to other indices such as the S&P 500, as price-weighted indices tend to avoid adding high-priced stocks because their price movements can have a huge impact on the index.
This split may also trigger Nvidia's addition to other indices such as the S&P 500.$Dow Jones Industrial Average (.DJI.US)$This is because price-weighted indices tend to avoid adding high-priced stocks, as their price movements can have a big impact on the index.
As of Thursday's close on the East Coast, UnitedHealth Group was the highest-priced stock in the Dow Jones Industrial Average, at $501.92 per share, followed by Goldman Sachs at $458.10, and the third highest was Visa at $424.52, well below Nvidia's $1,209.$UnitedHealth (UNH.US)$was priced at $501.92.$Goldman Sachs (GS.US)$was priced at $458.10.$Microsoft (MSFT.US)$Visa's share price was $424.52, which is far below Nvidia's $1,209. Amazon was added to the Dow Jones Industrial Average earlier this year after its stock split in 2022.
Being included in major indices can also help drive stock prices higher, increase investor visibility, and push mutual funds and exchange-traded funds (ETFs) that track the index to add the stock to their holdings.
"Expect Your Expectations" game.
This week, according to S3 Partners, the nominal value of short positions on Nvidia rose to $34.4 billion, or about 1% of the company's total market value. By comparison,$Apple (AAPL.US)$'s short position is $19.4 billion,$Tesla (TSLA.US)$'s short position is $18.4 billion.
This means that a significant amount of capital is betting that Nvidia will fall after the bullish trend is realized due to the stock split. This situation has occurred many times in the history of the US stock market.
However, when expectations become consensus expectations, there are often huge variables. This is also a historical rule of the market.
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