Nvidia's Stock Split History Raises Caution Despite AI Surge: What Investors Should Know Before Buying in 2024

Nvidia's Stock Split History Raises Caution Despite AI Surge: What Investors Should Know Before Buying in 2024
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The surge in demand for artificial intelligence (AI) hardware, particularly following the launch of ChatGPT in November 2022, has catapulted Nvidia’s stock price by an astounding 800%. This meteoric rise has positioned Nvidia as the best-performing stock in the S&P 500 for 2023, and the company is on track to replicate this success in 2024, already leading the index with gains that outpace the second-place Vistra by 34 percentage points.

Nvidia's Stock Split: Historical Patterns Suggest a Possible Decline

In May, Nvidia announced a 10-for-1 stock split, completed in June, aimed at making stock ownership more accessible to employees and investors. However, historical data indicates that this may not be all good news for investors. While stock splits generally outperform the S&P 500—stocks that split have, on average, appreciated by 18% during the 12 months following their announcements—Nvidia’s specific history tells a different story.

Nvidia has conducted five stock splits since its initial public offering (IPO) in 1999. Unfortunately, these events have typically been followed by a decline in share prices. On average, Nvidia’s shares have dropped by 23% in the 12 months following its previous stock splits and were still down by 3% after 24 months. With Nvidia's most recent split in June, shares started trading at a split-adjusted price of $120.37 and have since returned a modest 2%, leaving an implied downside of 25% through June 2025.

High Expectations and Uncertainties Surround Nvidia's Upcoming Earnings

Nvidia’s dominance in the GPU market—where it accounts for 98% of data center GPU shipments and holds a substantial share in AI processors—has been bolstered by strong financial performance. In the first quarter of fiscal 2025, the company reported a revenue increase of 262% year-over-year, reaching $26 billion, while non-GAAP earnings surged by 461% to $6.12 per diluted share, surpassing Wall Street’s expectations.

However, the stakes are high for Nvidia’s upcoming second-quarter earnings report on August 28. Analysts are anticipating significant growth, with revenue and earnings expected to rise by 112% and 137%, respectively. Additionally, there are rumors of potential delays in the shipments of Nvidia’s next-generation Blackwell GPUs, adding a layer of uncertainty to the forthcoming results.

Investor Dilemma: Buy Now or Later?

Given the high expectations and uncertainties, Nvidia's upcoming earnings release could result in significant stock price movement. Options pricing data suggests an 11% price swing, indicating a potentially volatile trading session following the report. This puts investors in a challenging position—whether to buy shares now and risk potential losses or wait and potentially miss out on gains.

A prudent approach for interested investors might be to start with a small position now, prepared for volatility, and then consider increasing their holdings if the stock declines after the earnings report.

Final Considerations: Nvidia Not Among Motley Fool's Top Stock Picks

Despite Nvidia’s impressive performance, it’s worth noting that The Motley Fool Stock Advisor analyst team has identified 10 other stocks they believe are better investments right now. Nvidia didn’t make the cut, suggesting that there might be more promising opportunities elsewhere for those looking to invest. For context, a $1,000 investment in Nvidia when it was first recommended by The Motley Fool in April 2005 would have grown to $792,725 today.