To The Moon

The Most Important Stock on Earth: NVIDIA (NVDA), AI's Leading Giant, Will Implement a 10-for-1 Stock Split This Week

Following a series of significant gains over the past few trading days, NVIDIA's market value surpassed Apple's overnight, making it the second-largest company in the United States, with its stock price exceeding $1,200. Post-split, NVIDIA's stock price will be around $120, making it more accessible to retail investors.

Investors continue to buy large quantities of NVIDIA stock, betting on potential gains in the short and long term. But is this stock really the best investment for you?

Retail Frenzy: Stock Split Sparks Market Excitement

NVIDIA's stock split will take effect after the close of trading on Friday. Investors holding the stock as of Thursday will receive nine additional shares for each share they own, with the stock price adjusted accordingly to reflect the split.

In a stock split, the company increases the number of shares, thereby reducing the price per share. However, the total dollar value of all outstanding shares remains unchanged, maintaining the company's valuation. This weekend, NVDA will execute a 10-for-1 stock split. This means each NVIDIA stockholder will receive nine additional shares for every share they own post-split. Thus, NVIDIA shareholders will own more shares at a lower price.

To receive the additional shares, investors must be NVIDIA shareholders by the record date (June 6). NVIDIA will issue new shares at the close of the next trading day. The stock will then begin trading at the adjusted split price on June 10.

Additionally, NVIDIA's lower price could pave the way for its inclusion in the Dow Jones Industrial Average. Amazon (AMZN) performed a 20-for-1 stock split in June 2022 and joined the Dow earlier this year.

The AI Gold Rush: NVIDIA Leads the Trend

NVIDIA has been at the forefront of tech companies integrating AI into their products and services. NVIDIA's founder and CEO, Jensen Huang, stated, "The next industrial revolution has begun. Countries and numerous companies are collaborating with NVIDIA to transition traditional data centers worth trillions of dollars to accelerated computing and build 'AI factories' to produce a new product called 'artificial intelligence.'" Huang noted that AI will bring significant productivity and revenue growth across almost all industries, with substantial benefits in cost-effectiveness and energy efficiency.

New Generation Chips: Driving Future Growth

Last weekend, NVIDIA unveiled its next-generation AI chip, "Rubin," expected to drive another massive growth phase for the chipmaker. Rubin, set to launch in 2026, appears to accelerate the already rapid development of the company's AI chips. Huang stated it will include new graphics processing units (GPUs), a new central processing unit (CPU) named Vera, and advanced networking chips.

NVIDIA also plans to launch the Blackwell Ultra processor in 2025, with the first Blackwell processors starting deliveries later this year, replacing the popular Hopper generative AI chips.

Additionally, Elon Musk recently announced that the supercomputer for his AI startup xAI will utilize NVIDIA technology. This week, Foxconn announced plans to establish an advanced computing center in Taiwan using NVIDIA's Blackwell chips. These developments are expected to further boost the company's growth prospects.

Wall Street's Optimism: Analysts Raise Target Prices

Ahead of NVIDIA's high-profile stock split, Wall Street analysts continue to raise their target prices. Bank of America labeled NVIDIA a "top pick," reaffirmed its buy rating on the stock, and increased its target price from $1,320 to $1,500. The analyst believes this move will "continue to cement NVIDIA's leadership in AI" as the chipmaker accelerates its product upgrade cycle.

Driven by explosive growth prospects, Wall Street analysts have become more optimistic about NVIDIA, raising their price targets post-earnings. According to short-term price targets provided by 40 analysts, NVIDIA's average target price is $1,152.04. The forecast ranges from a low of $608.40 to a high of $1,400.00. The average target price represents a 1.06% decline from the last closing price of $1,164.37 on June 4. However, as more activities and momentum build around NVIDIA's product releases, analysts may further raise their target prices from now on.

Despite NVIDIA's relatively high stock price, with a price-to-earnings ratio of 39 times (based on expected profits over the next 12 months), analysts' profit expectations have risen even faster than the stock price, according to Bloomberg.

Stocks or ETFs: Which Should You Choose?

Now let's return to our question: Should you buy NVIDIA stock or a high-growth ETF? This depends on your risk tolerance and investment strategy.

If your portfolio already includes a diversified mix of tech stocks (including semiconductor companies) and you are an active investor, you might want to buy NVIDIA stock and bet on the company's next wave of growth. After all, the company is set to launch the highly anticipated Blackwell platform later this year, which could further boost its earnings and stock performance.

But if you're a cautious investor or haven't invested much in the semiconductor sector, it might be better to diversify rather than bet on a single company. ETFs can help you do that, allowing you to gain exposure to all top companies and benefit from their current and future growth.

Investment Opportunities: Capturing NVIDIA's Growth Potential

Investors looking to seize opportunities can consider allocating to this AI darling through long-term performing ETFs.

Chip ETFs: VanEck Vectors Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX)

AI ETFs: Global X Robotics & Artificial Intelligence ETF (BOTZ) and iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)

Single Stock ETFs: NVIDIA's rapid growth has attracted some investors to single stock ETFs designed to double its daily returns. GraniteShares 2x Long NVDA Daily ETF (NVDL) holds about $2.8 billion in assets, while T-Rex 2X Long NVIDIA Daily Target ETF (NVDX) has amassed about $550 million. These instruments can be effectively used as short-term tactical trading tools around earnings reports and are not suitable for long-term holding.