Nvidia Stock Split Update: Down 2% Since June, History Says the AI Stock Will Do This Next

For many investors, Nvidia (NASDAQ: NVDA) has emerged as the quintessential artificial intelligence (AI) stock. That's because the company's graphics processing units (GPUs) are the industry standard in accelerating complex data center tasks, such as training machine learning models and running AI applications.

Nvidia shares have surged 780% since the generative AI application ChatGPT went viral in late 2022. That event triggered a tidal wave of AI infrastructure spending that is still building momentum, and Nvidia has been one of the biggest beneficiaries. In turn, the stock has become a staple of the AI trade.

Nvidia reset its soaring share price in June by conducting a 10-for-1 stock split. Shares have since tumbled about 2%, but history says Nvidia stock may have further to fall.

Stock-split stocks like Nvidia typically outperform the S&P 500

Generally speaking, companies conduct forward stock splits after substantial share price appreciation, which itself is suggestive of compelling growth prospects and a competitive edge. Companies that possess those qualities tend to produce above-average returns for shareholders.

Indeed, Bank of America reviewed data back to 1980 and found a correlation. Companies that split their stock returned an average of 25.4% during the 12 months after announcing the split. By comparison, the S&P 500 returned an average of 11.9% during the same period.

Here's what that could mean: Nvidia announced its latest stock split after the market closed on May 22, 2024. The stock traded at a split-adjusted $95 per share. History says its share price will increase 25.4% to $119 by May 2025. But the stock already trades at $119 per share, leaving zero implied upside (or downside) over the next eight months.

Nvidia has performed poorly following past stock splits

We can also make predictions about Nvidia's future performance by reviewing company-specific data. For instance, the chipmaker completed five stock splits prior to the most recent one. The chart below shows how the stock performed during the 12 months and 24 months following those five splits.

Data source: YCharts.

As shown above, Nvidia has usually performed poorly following stock splits. Its share price has declined by an average of 23% during the first 12 months and was still down by 3% on average after 24 months.