NVIDIA’s 10-for-1 stock split: Should you or should you not buy into the illusion

Nvidia’s 10-for-1 stock split was recently announced along with its earnings for the first quarter of the fiscal year on Wednesday. According to the company’s release, the split-adjusted shares will start trading on June 10.

While stock splits can generate excitement among investors, they do not change the fundamental value of a company. Instead, the effect is “In a report by CNBC Make It, Mr Sam Stovall, CFRA’s Chief Investment Strategist, explained, “People would rather buy 16 shares at $20 than four shares at $80, even though it’s the same value—it’s just human nature.”

A stock split means a company issues additional shares to current shareholders based on how many shares they own. For Nvidia’s upcoming 10-for-1 split, if you own one share worth $1,000, you will end up with ten shares worth $100 each.The day after the split, you wouldn’t notice a change in your portfolio other than that the share price and number of shares had changed,” he added.

In essence, a stock splits should not be the primary reason to invest in a stock. Investors need to focus on the company’s fundamentals instead.

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