These 2 Big Moves By Nvidia May Signal Massive Growth Ahead
Nvidia (NASDAQ: NVDA) has wowed investors again, reporting record quarterly revenue and earnings that beat analysts' estimates. This week, the company announced triple-digit gains in quarterly revenue and net income as demand for its artificial intelligence (AI) products and services soared. Nvidia dominates the AI chip market, holding 80% share, and these results show the company is maintaining its leadership.
Still, some investors have worried about Nvidia's ability to keep earnings and share price roaring higher as rivals like Intel or Advanced Micro Devices launch high-performance chips -- at lower prices. And others question Nvidia's ability to keep earnings rising at such a pace over the long term.
But Nvidia doesn't seem worried about its growth prospects or its ability to stand out from the crowd. And the company even made two big announcements that show confidence in its future, potentially signaling massive growth ahead.
Image source: Getty Images.
Nvidia's top-performing chip
First, a bit of background on Nvidia's share performance. The stock has soared more than 500% over the past three years, steadily climbing as more and more businesses turn to the company for their AI needs. Nvidia sells the world's top-performing chip, the H100 -- and this will be followed by the even-better H200 in the second quarter and the new Blackwell architecture and chip later this year.
But Nvidia doesn't sell only chips. The company offers customers a wide variety of products and services, including an entire software platform, so they can enter the AI race and potentially win. All the public clouds sell Nvidia's wares, so it's pretty easy for customers to gain access to these top AI tools.
All this has boosted earnings, and as a result, stock performance, bringing the shares to more than $900 in recent times and more than $1,000 after this week's earnings report.
A few days ago, I predicted Nvidia's next big announcement would be a stock split -- and Nvidia did just that. But along with the split, Nvidia made another key move, hiking its quarterly dividend payment by $150%.
Nvidia says it will launch a 10-for-1 stock split, effective June 7. This means if you hold one Nvidia share right now, as of that date, you'll own 10 shares. This doesn't change the value of your holding or the total market value of Nvidia, but it does bring down the price of each individual share.
Making Nvidia stock more accessible
The advantage of stock splits is they make the stock more accessible to a broader range of investors. And Nvidia even said this was its reason for making the move -- to make it easier for employees and investors to get in on the shares.
Due to that operation, Nvidia's newly raised dividend payment only will amount to $0.01 post-split, but considering Nvidia's need to invest in research and development to stay ahead in the AI chip market, it's positive that this high-growth company continues to pay a dividend.
Now let's talk about why these moves may signal massive growth ahead. Companies generally announce stock splits after strong business performance has driven significant share gains -- the idea is these companies have what it takes to continue growing post-split, and this should spur a new wave of share price performance.
Nvidia's confidence about the future
So Nvidia's upcoming stock split and its commitment to paying a dividend suggest it's pretty confident about what's ahead. And its earnings report shows the company has reason to feel this way. Not only were current earnings figures strong, with gross margin widening to top 78%, but the company said demand is outpacing supply.
On top of this, Nvidia's new Blackwell architecture represents a major shift, as it includes six game-changing technologies. This could drive significant growth later in the year and beyond.
What does this mean for investors? Nvidia, whether you buy the stock pre- or post-split, represents a great investment thanks to its leadership in the high-growth market of AI. The company's recent moves indicate it's confident in the future, and a new wave of growth could lie ahead -- so it's not too late for you to get in on this exciting AI innovator.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
