Nvidia may be on the verge of extending its dominant position in the artificial intelligence chip market.
NVIDIA (NVDA -0.36%) has risen sharply in recent years and the stock continued to increase its gains recently when it announced something many investors had been waiting for: a stock split. The company decided to do a 1:10 split to bring its shares to a level that makes it easier for a wider range of investors to buy them. To achieve this, these operations will issue more shares to current holders.
Before the deal, Nvidia’s stock price rose above $1,000 per share – a level that could pose a psychological hurdle for some investors and a difficult buy for those looking to take a small position. Now that Nvidia stock is trading at around $120, those issues have disappeared. So while stock splits are not catalysts for stock performance, they can be a positive move for a company.
But Nvidia’s big moves this year aren’t over yet. In fact, Nvidia has something big planned for the second half of the year. I expect this move by the artificial intelligence (AI) chip giant will be much bigger than the stock split — and give you a good reason to buy the stock. Let’s look at what’s ahead.
Image source: Getty Images.
Nvidia’s lower price per share
Of course, it’s exciting to get Nvidia at a lower price per share thanks to the stock split, but it’s important to remember that splits don’t change a company’s valuation: Nvidia isn’t cheaper today than it was before the split. In fact, a stock split doesn’t change anything fundamental.
This upcoming move, however, will. First, a little background. Nvidia is already the world’s leading supplier of AI chips, commanding 80% of the market share with its graphics processing units (GPUs). That’s because Nvidia’s GPUs are the fastest on the market and support critical AI tasks like training and inferencing – the processes that help large language models solve complex tasks.
Nvidia also sells a variety of related AI products and services that make it the first stop for anyone starting an AI project. All of this has helped the company grow revenue and net income by triple digits quarter after quarter.
And now for my prediction: The upcoming launch of the Blackwell architecture and Nvidia’s best chip yet is much bigger news for the company and could be a significant catalyst for the stock both in the short term and long term as this platform drives revenue.
Blackwell could be a game-changer as it represents a completely new way of driving AI, achieving incredible performance at a cost and power consumption that is up to 25 times lower than Hopper, the previous system. This is a critical feature as these savings reduce an AI customer’s overall cost, potentially making the Nvidia system the most economical choice in the long run.
Blackwell’s groundbreaking innovations
Blackwell includes six breakthrough innovations, including the world’s most powerful chip, the next generation of Nvidia NVLink that enables high-speed communication between up to 576 GPUs, a predictive maintenance system to maximize system function, and more. And the Blackwell GPU delivers up to four times faster training and 30 times faster inference than Nvidia’s current leading chip, the H100.
And now the really good news: Nvidia CEO Jensen Huang says demand for Blackwell has outstripped supply and he expects it to continue to do so next year. The launch strategy of making Blackwell available in more than 100 systems from original equipment manufacturers and original design manufacturers could ensure a strong start. All of this gives reason to be optimistic about the platform’s debut and its contribution to revenue in the coming quarters.
Blackwell’s product launch is also likely to reassure investors who fear that competitors could take market share from the chip giant, as the product launch is likely to give Nvidia a significant lead.
Although Nvidia has been making headlines recently for its stock split, the impending launch of Blackwell is much bigger news — and news that could help this already powerful AI stock continue its gains in the second half of the year and beyond. And that makes Nvidia a great buy now, even after its 150% rise in the first half of the year.
Adria Cimino does not own any stocks mentioned. The Motley Fool owns Nvidia and recommends the company. The Motley Fool has a disclosure policy.
