Should You Buy Nvidia 3 Months After Stock Split? Here’s what history says.

Nvidia (NVDA 1.92%) the stock has risen more over the past five years, even topping $1,000 in early 2024. This has come as the company has consolidated its dominance in the artificial intelligence (AI) chip market, generating triple-digit revenue and growth of profit, quarter after quarter.

A share price around or above the $1,000 mark is not always affordable for every investor. Recognizing this, Nividia launched a stock split in early June.

Stock splits lower the price per share of a company’s stock by issuing additional shares to current holders. However, these moves don’t change anything fundamental about a company, so they don’t actually make the stock cheaper. However, the lower price may attract investors who were not prepared to pay hundreds of dollars or more before the split.

Now, as we head into the third month post-split, it’s only fair to take a look at Nvidia’s performance so far and consider whether this stock market darling can continue to grow. Let’s look to history for help.

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Nvidia stock split

The company announced the plan to split its stock in May, when the stock was trading above $900. After the announcement, they quickly passed $1,000. The stock went on to gain nearly 30% from the announcement date until the June 7 split. The 10-for-1 split ratio meant the stock opened at around $120 on June 10.

Since then, Nvidia shares have experienced some ups and downs, but overall, they’ve lost about 4%. So we’re far from the typical Nvidia performance we’ve seen at the start of the year and throughout 2023.

Where is Nvidia stock headed? History shows us that in 2 of the 3 previous Nvidia stock splits, after the first three months post-split, the stock continued to rise by double digits in the following two months. But in the case of the other split, shares fell by double digits during that period.

Using that historical example, Nvidia’s performance in the months following a stock split has been mixed, but leaning toward the positive.

Now let’s consider broader stock split data. Overall, in a study from 1980 to today, companies that split their stock outperformed S&P 500according to a Statista report using Bank of AmericaData from the Research Investment Committee. Stocks that split had an average total return of more than 25% in the 12 months after the announcement, twice the average return for the S&P 500 over that time, the data show.

A potential boost for the stock

Why is this the case? The idea is that by lowering the price of a stock, more investors will flock to a stock, providing a boost. While this may be partially true, it is not the only element that investors look at. They will not buy shares just because completed a split.

In Nvidia’s case, investors have begun to worry about increasing competition in the AI ​​chip market, and concerns about the broader economy have also taken root. Economic uncertainty generally weighs on high-growth companies like Nvidia, as they rely on strong economic conditions to sustain their businesses. These factors, along with some profit-taking, have held Nvidia back of late.

As for what’s next, history tells us that Nvidia has a strong chance of moving forward in the coming months if the stock follows historical patterns. But history doesn’t always repeat itself, so I wouldn’t buy Nvidia today for a quick profit. The good news, though, is that Nvidia still has plenty of gas in the tank to deliver long-term gains.

The company is about to release its new Blackwell architecture and its most powerful chip yet, and Nvidia promises to update its chips annually. This should keep revenues growing. Of course, some customers will opt for a rival’s lower-priced chip, or use some of Nvidia’s with some of the rival’s. But I don’t expect this to significantly reduce Nvidia’s market share, as the biggest AI players generally want the best and fastest chip to power their projects.

All of this means that whether history is correct about Nvidia’s future performance or not, you could stand to gain by buying shares of the chip giant today and holding for the long haul.