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Nvidia stock split may not lead to a sustained rally, but could replace Intel in the Dow index

Nvidia stock split may not lead to a sustained rally, but could replace Intel in the Dow index

Nvidia Corp. (NASDAQ:NVDA) recent 1:10 stock split has Goldman Sachs to warn investors not to expect a sustained rally.

Although Nvidia’s share price rose nearly 27 percent in May and another 10 percent this month, reaching a market capitalization of $3 trillion, Goldman Sachs stresses that stock splits generally offer limited long-term benefits.

Goldman Sachs reviewed 45 Russell 1000 stock splits since 2019 and found that shares typically rose 4% in the week following the announcement, but there was no discernible impact around the record date.

Also read: Why is AMD stock trading lower on Monday?

David Kostin, head of U.S. equity strategy at Goldman, noted that liquidity had changed little after the split.

In addition, stock splits have not significantly boosted retail trading activity.

However, Nvidia’s previous split in 2021 and Amazon.Com Inc’s (NASDAQ:AMZN) The 2022 split was an exception and showed an increase in retail business.

Ben Laidler, global market strategist at eToro, says the spin-off could position Nvidia for inclusion in the Dow and possibly replace it Intel Corp (NASDAQ:INTC).

Dennis Dick, market structure analyst at Triple D Trading, expects a certain degree of buyer exhaustion after the share split and notes a typical “hangover effect” after such price increases.

Nvidia’s valuation has risen 153% since the beginning of the year, driven by an AI hype supported by major US technology companies, including Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ: META) and Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL).

Nvidia, Microsoft, Meta, Alphabet and Amazon together account for about 60% of the S&P 500’s 12% return this year, with Nvidia contributing a third of that gain.

Price promotion: At last check on Tuesday, NVDA shares were trading 0.85% lower at $120.75.

Also read: Arm is a top choice alongside Nvidia for long-term success: Analyst

Disclaimer: This content was created in part using AI tools and reviewed and published by Benzinga editors.

Photo via Shutterstock

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