NVIDIA NVDA has been on a solid run with no signs of a slowdown. After blockbuster results, the AI chipmaker is making a series of new record highs on the upcoming 10-for-1 stock split, which will make its shares more affordable to a wider range of investors, including the ones who make small trades, and increase liquidity (read: NVIDIA in Rush to Overtake Apple: ETFs Set to Gain Further).
Investors seeking to tap the opportune moment could consider ETFs having the largest allocation to this AI darling. These are Strive U.S. Semiconductor ETF SHOC, AXS Esoterica NextG Economy ETF WUGI, VanEck Vectors Semiconductor ETF SMH, Grizzle Growth ETF DARP and TrueShares Technology, AI and Deep Learning ETF LRNZ.
Stock Split: A Retail Frenzy
In a stock split, the company increases the number of shares, reducing the share price. However, the total dollar value of all shares outstanding remains the same and doesn’t affect the company’s valuation. At the end of the week, NVDA will undergo a 10-for-1 stock split. This means that for each NVIDIA share that an investor owns, they will receive an extra nine after the split is completed. Thus, NVIDIA’s stockholders will receive a higher number of shares at lower prices.
To receive the additional shares, an investor must be a shareholder of NVIDIA on the record date, Jun 6. NVIDIA will issue the new shares at the end of the next trading day. The stock will then begin trading at the adjusted price after the split on Jun 10.
Also, the lower price of NVDA will likely pave the way for the company’s inclusion in the Dow Jones Industrial Average. Amazon AMZN joined the Dow earlier this year after undergoing a 20-for-1 stock split in June 2022.
AI Boom
NVIDIA has been at the forefront of technology companies racing to build AI into their products and services. NVIDIA founder and CEO Jensen Huang said, “The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence.”
Last weekend, NVIDIA unveiled its new next-generation of AI chips, dubbed “Rubin,” which is expected to drive another round of massive growth for the chip maker. Rubin, slated for release in 2026, appears to quicken the company’s already-accelerated pace of AI chip advancement. It will include new graphics processing units, or GPUs, a new central processing unit (CPU) called Vera and advanced networking chips, Huang said (read: Can NVIDIA's AI Chip Dominance Continue?).
NVIDIA also plans to unveil a Blackwell Ultra processor in 2025, with the first Blackwell processors slated for delivery beginning later this year, replacing the widely popular Hopper generative AI chips.
Further, Elon Musk recently announced that AI start-up xAI's supercomputer will run on NVIDIA technology. . This week, Foxconn announced its plans to build an advanced computing center in Taiwan using NVIDIA's Blackwell chips. These are expected to provide a further boost to the company’s growth prospects.
Bullish Analysts
Wall Street analysts continue to boost their price targets ahead of NVIDIA's high-profile stock split. Bank of America called NVIDIA a "top pick," reiterating its buy rating on the stock and raising its price target to $1,500 from $1,320. As the chipmaker is accelerating its product upgrade cycle, the analyst believes the move will "continue to bolster NVIDIA’s AI leadership position."
Driven by explosive growth prospects, Wall Street analysts have turned more bullish on NVIDIA and raised the target price on the stock post-earnings. At least 28 of the 58 brokerage firms have raised their price targets on the stock, pushing up the median view to $1,200, according to the recent LSEG data.
Attractive Valuations
NVIDIA has skyrocketed about 132% so far this year, following a nearly 240% rise in 2023, courtesy of the fast-growing adoption of its H100 AI chips. However, its valuation does not seem overstretched, given that its earnings are growing faster than the share price. NVIDIA is currently trading at a P/E ratio of 42.85 versus 47.81 for Advanced Micro Devices AMD.
NVIDIA stock is expected to surge 258% from the current levels and hit a market valuation of $10 trillion by 2030, according to I/O Fund tech analyst Beth Kindig (read: NVIDIA's Explosive Earnings: Should You Buy the Stock or ETFs Now?).
ETFs in Focus
Strive U.S. Semiconductor ETF (SHOC) – NVIDIA occupies the top position with 31.8% of assets.
AXS Esoterica NextG Economy ETF (WUGI) - NVIDIA occupies the top position with a 25.6% share in the basket.
VanEck Vectors Semiconductor ETF (SMH) - NVIDIA is the top firm, accounting for 24.2% share.
Grizzle Growth ETF (DARP) - NVIDIA occupies the top position with 23.7% of the assets.
TrueShares Technology, AI and Deep Learning ETF (LRNZ) - NVIDIA takes the top spot at 17.5% share.
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