Nvidia (NASDAQ: NVDA) has probably been the most watched stock on the planet over the past several months. This is because the company dominates the artificial intelligence (AI) chip market, and its soaring revenue has prompted the stock to skyrocket. In the first half, the shares soared more than 150% — and that’s after already gaining more than 1,300% in the previous five years.
In fact, this momentum pushed Nvidia stock past the threshold of $1,000, a level that may be a psychological barrier for some investors — and in other cases makes it difficult for small investors to buy without relying on fractional shares. So Nvidia launched a stock split recently to bring down the price of each individual share. Investors welcomed the news, and the stock rallied nearly 30% from the split announcement through the actual operation.
Now, though, the big question is whether Nvidia’s momentum will continue post-split and whether this top chip designer will soar in the second half. Let’s look to history for some answers.
Image source: Getty Images.
Looking at historical patterns
First, it’s important to note that just because a certain pattern occurred in the past doesn’t guarantee the same pattern will continue in the future. So, any conclusions we draw may guide us — but they aren’t set in stone. The market or a particular stock may surprise us.
That said, patterns do replicate frequently enough to make them worth our consideration. They may offer us an idea of what generally happens after a certain event, making us aware of likely possibilities.
Let’s move on to the idea of stock splits and what history shows. A stock split, through the issuance of new shares to current holders, lowers the price of each individual share — but without changing the market value of the company or the valuation of the stock. So, the operation hasn’t changed anything fundamental about the particular company or stock.
But the split accomplishes one major thing: It opens the investment opportunity up to a broader range of investors. This is positive for you and me because it makes it easier for…
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