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Are Billionaires Loading Up on Nvidia Ahead of Its 10-for-1 Stock Split?

We probably won’t know for sure whether billionaires will buy Nvidia stock for a few months.

Money attracts money. So it’s no surprise that some of the world’s richest investors hold positions in Nvidia (NVDA 1.25%). The company is making huge money from growing demand for its artificial intelligence (AI) chips.

Nvidia will conduct a 10-for-1 stock split after markets close on Friday, so its shares will begin trading at a much lower price on Monday. Are billionaire investors stocking up on Nvidia stock ahead of its next stock split?

Don’t count on it

The truth is, we don’t know for sure if billionaires are snapping up Nvidia stock. The latest round of regulatory disclosures – revealing their holdings at the end of the first quarter of 2024 – took place a few weeks ago. Unless one or more billionaire investors publicly mention that they recently purchased Nvidia, it will likely be a few more months before we know whether they have increased their stakes in the graphics processing unit (GPU) maker.

However, based on their Q1 activity, you probably shouldn’t count on billionaires buying Nvidia before their stock split. Several very wealthy investors significantly reduced their stakes during the first three months of the year.

For example, Citadel founder Ken Griffin reduced his hedge fund’s position in Nvidia by almost 68% in the first quarter. David Tepper sold 44% of Nvidia’s Appaloosa shares last quarter. Stanley Druckenmiler reduced his Duquesne Family Office’s stake in Nvidia by 71.5%.

These investors fully understand that the division of Nvidia shares in no way changes the fundamentals of its business. Splitting inventory is like taking an eight-piece pizza and turning it into 16 pieces. There’s always the same amount of pizza with the same toppings, it’s just that the slices are smaller.

Additionally, billionaires know that the widespread use of fractional stock trading has changed the impact of stock splits. While many brokerages now allow their clients to buy and sell fractional shares, most investors wanting to add Nvidia to their portfolio have been able to do so, regardless of their sky-high stock prices.

A certain one perhaps

Still, I think there’s a good chance that some billionaire investors will buy Nvidia before its stock split. They might think that stock splits of widely followed stocks like Nvidia will still have a psychological impact on retail investors despite the advent of split-stock trading.

Perhaps a more important consequence of Nvidia’s stock split is that the stock could be added to the market. Dow Jones Industrial Average in the near future. The main factor preventing Nvidia from being added to the Dow was its high stock price. It would not be surprising if a few billionaires increased their hedge fund stakes in Nvidia in anticipation of exchange-traded funds (ETFs) and mutual funds tracking the Dow Jones index buying Nvidia if it is included in the index.

I suspect that ultra-wealthy investors might also be buying Nvidia right now for reasons unrelated to the upcoming stock split. The company announced spectacular first quarter results two weeks ago. This quarterly update could have encouraged some billionaires who had reduced their stock positions to resume their purchases.

In particular, Nvidia’s optimism about demand for its upcoming Blackwell platform could have attracted wealthy investors into the fold. Blackwell will be the company’s most powerful architecture for AI chips to date.

Should You stock up on Nvidia stock?

Does it matter what billionaire investors do regarding Nvidia? Not really. The most important question is: should it You stock up on Nvidia stock? The answer to this question depends on your investing style.

Income investors will almost certainly want to look elsewhere. Although Nvidia pays a dividend, its forward yield is a miniscule 0.0035%.

Risk-averse investors might also find other stocks that appeal to them more. Nvidia is priced higher based on some valuation metrics due to its formidable growth prospects. However, much of this expected growth is already priced into the stock. If this doesn’t come to fruition, the stock could plunge.

Nvidia should, however, be a great choice for growth investors willing to take risks. Perhaps the impending stock split will be a big catalyst; maybe it won’t. Regardless, Nvidia’s continued innovation should keep it at the forefront of the AI ​​chip market.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool has a disclosure policy.

News Source : www.fool.com
Gn bussni

Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe.Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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