Stock market today: Stocks turn higher as huge week on Wall Street kicks off

Nvidia stock (NVDA) began trading Monday on a new 10-for-1 split basis. That means one share of the artificial intelligence giant went from Friday’s closing price of $1,208.88 to $120.88. The stock fell about 2% shortly after the opening bell.

Yahoo Finance’s Dan Howley and Josh Schafer report:

The split means that owners of Nvidia common stock held as of the close of market on Thursday received 10 shares for each one share they held. For example, if a shareholder owned four shares of Nvidia as of Thursday, they’ll now own 40 shares post-split.

Stock splits make owning shares of a stock more affordable by lowering the price of individual shares without diluting the value of existing shareholders’ total holdings.

“The stock split is going to make Nvidia a lot more reachable for a lot of these retail traders,” Option Research & Technology Services’ Matt Amberson told Yahoo Finance last Thursday. “Now, you rarely see a stock over $1,000 with a 50% implied volatility, so the prices of the options are extraordinarily high, so options traders are really looking forward to the split.”

Nvidia’s split comes after the company’s total market valuation briefly eclipsed $3 trillion on Wednesday, pushing the chip firm past Apple to become the second-most-valuable publicly traded US company.

Shares of Nvidia have skyrocketed thanks to the explosion in interest in generative AI that kicked off when OpenAI debuted its ChatGPT software in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT) have been battling to get their hands on Nvidia’s hardware to power their own generative AI platforms.

Stock splits are viewed by investors as a sign of strength, and consequently companies that split their stock typically outperform the S&P 500 in the year following their announcement.

On average, stocks rise 25% in the 12 months following the announcement of their split compared to an average return of 12% from the S&P 500 in the same time frame, per analysis from Bank of America. This has been true “across market regimes,” BofA investment and ETF strategist Jared Woodard wrote in a note to clients.

Notably, the trend includes the time period from 2000 to 2009, amid the unwinding of the tech bubble. Nvidia shares are up about 27% since the company announced the split on May 22.