Nvidia Fuels Dow Inclusion Speculation Post-Split


Nvidia’s (NASDAQ:NVDA) recent 10-for-1 stock split, aimed at attracting retail investors, has sparked speculation about its potential inclusion in the blue-chip Dow Jones Industrial Average (DJIA).

The split reduces the per-share price, making the stock more accessible to employees and investors, while increasing the number of outstanding shares without altering the company’s overall valuation.

“A side effect of Nvidia’s stock split is that it puts the company in contention to join Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) in the Dow, possibly replacing Intel (NASDAQ:INTC), which currently holds the lowest weighting,” stated Ben Laidler, global markets strategist at eToro.

Nvidia shares dipped 0.5% in premarket trading on Monday, following a nearly 27% rise since the announcement of the split and a strong earnings forecast last month. The AI chip leader has also achieved a $3 trillion market valuation, surpassing Apple to become the second most valuable company globally, behind only Microsoft (NASDAQ:MSFT).

Market analysts note that stock splits generally appeal to individual investors who trade in smaller quantities and have less capital than institutional investors.

However, Goldman Sachs strategists, led by David Kostin, mentioned that most recent stock splits have not significantly boosted retail trading activity, with notable exceptions such as Amazon’s 2022 split and Nvidia’s 2021 split.

“Investors usually assign higher valuations to liquid stocks due to their low trading costs and flexibility in various market conditions,” the strategists explained.

Goldman’s analysis of 45 Russell 1000 stock splits since 2019 showed that while trading volumes tend to spike after split announcements, there is minimal change during and after the splits take effect.

Nvidia’s stock was trading at $120 per share post-split, compared to $1,200 on Friday, positioning it as a potential candidate for the 30-member price-weighted Dow index.

An S&P Dow Jones Indices spokeswoman stated in late May that the organization does not comment or speculate on potential index additions or deletions.

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