Nvidia Eyes Dow Jones After Stock Split Fuels Speculation

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Nvidia’s recent 10-for-1 stock split, aimed at making shares more accessible to retail investors, has fueled speculation about the company’s potential inclusion in the prestigious Dow Jones Industrial Average. The split, which reduces the per-share price while maintaining the company’s market valuation, increases the number of outstanding shares, potentially making them more attractive to employees and smaller investors.

Ben Laidler, a global markets strategist at eToro, noted that this stock split could position Nvidia to join the Dow, potentially replacing Intel, which currently holds the lowest weighting among chip stocks in the index. Nvidia’s shares dipped 0.2% on Monday, following a 27% surge since the split announcement and a robust financial forecast. The AI chip giant recently achieved a market value of $3 trillion, surpassing Apple to become the second-most valuable company globally, behind only Microsoft.

Market structure analyst Dennis Dick of Triple D Trading cautioned that stock splits often lead to a temporary “hangover effect” where buyer enthusiasm wanes post-split, potentially leading to some exhaustion among buyers in the following week. 

Stock splits typically attract individual investors who trade in smaller quantities and have less capital compared to institutional investors. However, Goldman Sachs strategists led by David Kostin observed that most recent stock splits have not significantly increased retail trading activity, with notable exceptions like Amazon’s 2022 split and Nvidia’s 2021 split.

Goldman Sachs’ analysis of 45 Russell 1000 stock splits since 2019 found that while trading volumes generally increase briefly after split announcements, there is little change during and after the split takes effect. Investors often assign higher valuations to more liquid stocks due to their lower trading costs and greater flexibility in various market conditions.

Following the stock split, Nvidia’s shares are trading at approximately $120 per share, down from $1,200 on Friday, positioning it as a potential candidate for the 30-member, price-weighted Dow index. While an S&P Dow Jones Indices spokeswoman declined to comment on potential index changes, Nvidia’s inclusion remains a topic of interest among market watchers.