① Based on the closing price of $1064.69 per share last Friday, Nvidia's stock price is approximately $106.47 per share after the stock split; ② If Nvidia is eventually included in the Dow, it will solidify the chipmaker's position as the most influential company in the US.
Financial Services, May 28 (Editor: Zhao Hao) Last week, US chip giants$NVIDIA (NVDA.US)$Financial results for the first quarter of fiscal year 2025 have been released. In addition to its impressive performance and guidelines, the company also announced in its financial report that, starting June 10, common shares will be split according to the “1 split of 10” ratio.
Based on last Friday's closing price of $1064.69 per share, after the stock split, Nvidia's stock price was approximately $106.47 per share. The company claims that the move is for its employees and investors to hold shares at a lower price. Generally speaking, this can indeed attract more retail investors to participate and increase trading volume and liquidity.
Nvidia's move is probably to prepare for inclusion in the “Dow Jones Industrial Average” (Dow), a blue-chip index with a history of only 128 years.
Unlike the S&P 500 index's “shareholding market value weighting,” the Dow uses “price weighting,” which means that price changes in high-priced stocks have a greater impact on the index level than changes in the price of low-priced stocks. This mechanism makes it difficult for extremely expensive stocks to be included in the Dow.
Simply put, among the 30 constituent stocks of the Dow, Allied Health, which has a stock price of more than 500 US dollars, compared to Intel, which has a stock price of close to 30 US dollars, has a greater impact on the index, and also makes the Dow less reliable in measuring overall market performance.
The Dow's stock selection is not subject to a strict set of rules, but the Committee is concerned about the qualifying companies' reputation, continued growth history, investor interest, and industry representation in the wider market.
Therefore, if Nvidia is eventually included in the Dow, it will solidify the chipmaker's position as the most influential company in the US.
Jay Woods, chief strategist at Freedom Capital Markets, said that if a company represents the next wave of technological developments — artificial intelligence and chip manufacturing, it should have a place in the Dow.
Art Hogan, chief market strategist at B. Riley Wealth, said, “Nvidia definitely met all the requirements to eventually become a component of the Dow: a strong reputation, a history of continuous growth, investor interest, and its industry representation in the broader market. A stock price of around $100 will make the initial stock index calculation easier when it is included.”
Based on the price after “1 divided by 10,” Nvidia will rank 22nd among the Dow's constituent stocks. However, the fluctuation in its stock price is expected to make up for the extent of its influence on the index. According to media calculations, Nvidia's influence on the Dow after the stock split is expected to rank in the top ten. In terms of total market capitalization, Nvidia will be the third-largest company by market capitalization, after Microsoft and Apple.
Woods believes Nvidia may replace Intel because the former is more influential and its products are being adopted by some of the biggest companies. “The growth is there, the story is there, and now the price is there.”
Woods added that although Cisco and IBM are also potential targets to be eliminated by the Dow, “it is most reasonable for me that Intel be replaced by Nvidia.”
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