Goldman Sachs downplays the Nvidia stock split hype, sees little impact

For investors hoping Nvidia ‘s stock split could translate into a sustainable rally, Goldman Sachs cautioned that the benefits from such an event are usually minimal. Last month, Nvidia announced a 10-for-1 forward stock split in its fiscal first-quarter earnings report. The shares began trading on a split-adjusted basis at market open on Monday. Nvidia shares surged nearly 27% in May and another 10% month to date to notch a $3 trillion market cap . A stock split doesn’t change a company’s underlying fundamentals or the intrinsic value of its shares. However, some believe such a split could boost the stock price as it theoretically could increase retail share ownership and liquidity as the cheaper stock price is more accessible to a wider range of investors. Goldman looked at the 45 Russell 1000 stock splits since 2019, finding that shares typically rose by 4% the week after the news. However, following weeks or around the effective date, prices didn’t show a clear impact, the firm found. “One theory for the announcement effect is increased liquidity. However, we find that liquidity showed little change after the split took effect,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note. Moreover, the Wall Street firm discovered that some of the most recent stock splits have not generated a significant increase in retail trading activity. Goldman compared the average percentage of shares traded by retail investors six months before and six months after a split took effect. Goldman said companies saw only a 0.2 percentage point increase in retail share of trading activity following stock splits on average. However, there have been a few exceptions in megacap tech stocks, including Amazon. Notably, Nvidia’s 2021 stock split led to a 7 percentage point increase in the average share of retail trading.