When Nvidia (NASDAQ: NVDA) released the results of its fiscal 2025 first quarter, the company defied Wall Street’s expectations with record-breaking results. Nonetheless, shareholders found themselves captivated by a different development.
Alongside its earnings report, Nvidia announced a significant 10-for-1 stock split, sparking a surge in share prices by over 14% since its revelation on May 22. This spike follows an impressive 117% increase in stock value since the start of the year, showcasing sustained investor interest likely spurred by Nvidia’s robust presence in artificial intelligence (AI).
The stock split is slated to occur after the market closes on Friday, June 7. Can this impending stock split transform Nvidia into a once-in-a-generation investment opportunity? Let’s uncover the evidence.
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A Recap of the Stock-Split Rationale
A concise overview of the rationale behind a stock split can offer insight into this process. If a company performs well over time, its stock price typically rises, rendering high-priced shares unattainable for many potential investors.
To address this disparity, companies may opt for a stock split to lower the share price. Nvidia stated in its announcement that this move aimed “to make stock ownership more accessible to employees and investors.” Consequently, regular investors can now comfortably acquire whole shares instead of fractional shares often provided by brokerage firms.
Following the stock split, shareholders will receive nine additional Nvidia shares for every share they own presently. Although the quantity of shares will increase tenfold, their value will decrease proportionally, meaning the fundamental dynamics driving Nvidia’s stock price will remain intact.
Is Nvidia Stock a Pioneer?
Beyond the mechanics of the stock split, a crucial question lingers: Is Nvidia a compelling investment prospect ahead of its highly awaited stock split? Let’s delve into the company’s recent performance.
In the fiscal year 2024, Nvidia witnessed a remarkable 126% annual revenue surge to a record $60.9 billion. Concurrently, their earnings per share (EPS) skyrocketed by 586% to $11.93. CEO Jensen Huang was unequivocal about the growth drivers, emphasizing that “Accelerated computing and generative AI have hit the tipping point. Demand is skyrocketing globally across various companies, sectors, and countries,” Huang affirmed.
Nvidia’s first-quarter results of 2025 portrayed a similar narrative. With record revenue hitting $26 billion, marking a 262% year-over-year growth, and an EPS of $5.98 witnessing a stellar 629% surge. Forecasts from management hint at sustained growth, with the projected second-quarter revenue of $28 billion signaling a 107% year-over-year upsurge. These robust outcomes signify a business firing on all cylinders.
The substantial adoption of AI fuels these results, with experts concurring that the demand is here to stay. Generative AI diminishes the time spent on arduous, mundane tasks, thereby boosting productivity. This economic surge is forecasted to inject between $2.6 trillion and $4.4 trillion into the global economy over the ensuing decade, as per research compiled by McKinsey & Company.
As Nvidia’s graphics processing units (GPUs) are the industry standard for running AI systems, the company is expected to reap the benefits of this ensuing wealth. These enduring tailwinds are poised to favor Nvidia in the long haul.
While critics highlight Nvidia’s premium valuation as a concern, there is credence to this viewpoint. Presently trading at 63 times earnings, the stock’s valuation may seem exorbitant at first glance. However, looking forward, Nvidia’s forward price-to-earnings (P/E) ratio stands at 39, compared to the S&P 500’s ratio of 27. Although not a direct comparison, this contrast underscores an intriguing gap.
Over the past decade, Nvidia has witnessed a staggering 2,260% revenue hike and an 11,530% surge in net income. These results have propelled the stock price upwards by 22,640%, dwarfing the S&P’s 170% gain.
Evidently, Nvidia stock may not resonate with every investor, particularly those wary of its valuation. For those harboring such reservations, purchasing the stock during notable declines or signs of weakness may be prudent. Nonetheless, given Nvidia’s solid track record and the prevailing advantageous winds at its back, the case for its premium valuation becomes more compelling.
Considering these factors collectively, the argument for Nvidia being a once-in-a-generation investment opportunity holds weight. To address the initial query that initiated this discourse, the timing of purchasing Nvidia stock concerning the stock split may be inconsequential. However, as outlined earlier, an investment in Nvidia appears commendable.
Should you Invest $1,000 in Nvidia Right Now?
Before contemplating an Nvidia investment, ponder this:
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Unveiling the Gems: A Closer Look at Investment Potential
Investors are always on the lookout for the hidden gems, the underdogs that can deliver the biggest returns. In a recent report on the 10 best stocks to buy now, Nvidia surprisingly did not make the cut. While Nvidia wasn’t on the list, the 10 chosen stocks have been touted to potentially yield significant returns in the upcoming years.
A Blast from the Past
Reflecting on April 15, 2005, Nvidia’s absence from the mentioned list is certainly intriguing. According to historical data, had an investor put in $1,000 at the time of the recommendation, they would have amassed an impressive $671,728 over the years.*
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Exploring Further
Curious to see which stocks made the coveted list? Delve into the analysis to uncover the 10 recommended stocks that could potentially be the market’s next big winners. The world of investing is full of surprises, and sometimes the overlooked opportunities turn out to be the most rewarding.
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