What You Need To Know Ahead of Nvidia's 10-for-1 Stock Split on Friday

UPDATE—June 6, 2024: This article has been updated to reflect more recent share price values and include additional information.

Nvidia’s (NVDA) stock price has continued to climb since the chipmaker’s blockbuster earnings report and 10-for-1 stock split announcement last month, with record highs lifting Nvidia's market capitalization above $3 trillion ahead of the stock split Friday.

After the split, Nvidia's stock price will be a fraction of what it was before the split, though a lower price could make Nvidia stock ownership more accessible to a wider range of investors and boost demand, potentially leading to more gains for Nvidia investors.

How Nvidia's 10-for-1 Stock Split Will Work

The split will affect shareholders of Nvidia common stock as of market close on Thursday, with investors receiving nine additional shares after market close on Friday. The first day of Nvidia's split-adjusted trading will be on Monday.

After the split, there will be 10 times as many shares of Nvidia common stock at a lower price point for individual shares, without impacting the total value of investors' Nvidia holdings or the company's market cap.

If Nvidia shares were trading at around $1,200 before the split, for example, an investor holding one share before the split would hold 10 shares priced at $120 each after the split. With a lower price per share, the split could make ownership more accessible to a wider range of investors.

What Could Happen to Nvidia Stock After the Split

After a stock split, some investors may view the stock's price as more affordable and decide to buy, driving up demand and in turn leading to a rise in the stock's price. For instance, when Amazon (AMZN) executed a 20-for-1 stock split in 2022, shares rose in the days following the split.

A stock split can also signal to the market that the company's stock price has been increasing enough to justify the move and investors may believe this growth will continue in the future.

"Historically, stock splits are bullish for companies that enact them, gaining 25% one year later vs. 12% for the broad index," according to Bank of America research.

The split could also raise Nvidia's changes of joining an index like the Dow Jones Industrial Average (DJIA), as price-weighted indexes like the Dow tend to avoid adding high-priced stocks because movements in their price could have an outsized impact on the index.

The highest-priced stocks in the Dow were UnitedHealth Group (UNH) at $498.78, Goldman Sachs (GS) at $459.62, and Microsoft (MSFT) at $423.13, as of 1:50 p.m. ET Thursday, well below Nvidia's price of $1,199.33. Amazon joined the Dow earlier this year after its 2022 split.

Inclusion in a major index can help fuel share gains as well, by boosting name recognition among investors and driving mutual funds and exchange-traded funds (ETFs) that mirror the index to add the stock to their holdings.