Weekly Update: NVDA Stock Split – What to Expect
Good evening, and welcome to this week’s edition of Stealth Trades!
NVDA stock is up 1,000% since the October 2022 lows…
Nvidia has cornered the market on AI semiconductor manufacturing. They sold $80 billion dollars’ worth in the last 12 months.
Sales are up 208% this year. And earnings grew by an astonishing 686%.
The market has never seen growth like this from a company of this size. And some investors seem to think no price is too high for record-breaking numbers like these.
Nvidia stock will undergo a 10-for-1 split before it begins trading on Monday. For every $1,200 share of NVDA stock you own on Friday, you will see ten $120 shares in your account on Monday.
This is common with big growth stocks. Without a split every few years, the share price would be out of reach.
Warren Buffett’s Berkshire Hathaway stock has never split. BRK.A shares currently trade for $625,000 apiece.
There is a lot of hype surrounding the NVDA split. Many retail traders expect the event to be a boom for the stock price since more investors will now be able to buy it.
I understand the thought process. But they’re wrong…
Nvidia is worth over $3 TRILLION dollars today. The impact of retail buying on this stock is negligible. Only large institutions wielding billions in buying power will have any effect on NVDA’s share price.
Historically, stock splits actually cause stocks to go down – at least in the short term.
Looking back over the last twenty years you will see that most of the big names (Amazon, Apple, Google, etc.) see the price drop in the weeks after a split takes place.
Amazon fell 17% in two weeks after a 20-for-1 split in 2022. Apple did a 4-for-1 split in 2020 and dropped 23%.
It doesn’t happen every time. But more often than not, when a leading growth stock undergoes a stock split, the near-term move is down… not up.
Needless to say, I wouldn’t buy NVDA next week. If anything, I would try to short it with a stop loss above the highs.
But what about the rest of the market? NVDA now makes up 8.22% of the Nasdaq index and 6.64% of the S&P 500. This one stock is responsible for more than a third of the index’s growth this year.
So, if it falls, don’t expect to see much progress in the rest of the market for a week or two.
Instead, it might be time to focus back on crypto.
Bitcoin, which is largely uncorrelated from the stock market, appears poised for another move higher.
Members will recognize the breakout pattern playing out on the chart above.
Bitcoin has a history of making strong moves after consolidations like this. Being driven by nothing but supply and demand, it tends to trend better without the interference of earnings and other corporate events like stocks have.
Three of the last four such patterns delivered nice gains (see chart below):
A fifth wave is not out of the question.
In fact, if we step way out on a monthly chart and put it in logarithmic scale to smooth the percentages…
This could be a monster move.
And thanks to new Bitcoin exchange traded funds, it is easy to take a position in any regular or retirement account. The most liquid options are GBTC, IBIT, BITO and ARKB.
Anything could happen. The past is not a perfect predictor of the future. But at these levels, I would bet on Bitcoin over Nvidia here.
Best wishes for your trading,
