Nvidia's 10-for-1 stock split: Is now the time to buy?

Nvidia (NVDA) is gearing up for a 10-for-1 stock split after the market close. Winthrop Capital chief investment officer Adam Coons joins Wealth! to discuss whether this provides a new buying opportunity for the chip giant as the AI race heats up.

Coons explains that while the split allows more investors into the stock, "the downside of it is, though, that large share prices usually are positioned for institutional investors who tend to be more long term, and their decision making is long term. And so they're not as visceral in their reactions to maybe an earnings release or some other news event that would cause them to sell out of an entire position relative to retail investors, who would buy in and they might have a more emotional attachment to the stock." He notes that the stock split will open up an opportunity for investors who have sat on the sidelines as the price becomes more attractive.

He adds that "the whole AI pie is growing" as the technology seeps into all corners of the market. Coons points to the cybersecurity sector and companies like CrowdStrike (CRWD) as an area getting a boost from the technology. In addition, he explains that Qualcomm (QCOM) is well positioned as AI becomes integrated into laptops.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl

Video transcript

Let's switch gears here and talk.

A little NVIDIA.

NVIDIA is set to complete its highly anticipated 10 for one stock split after the market closed today.

The strategic move aiming to make the stock ownership of the chip giant more accessible but with greater accessibility to investing in NVIDIA, what should investors consider on the next chapter for the A I darling, Adam Moons Winthrop Capital Chief Investment Officer joins us now to discuss Adam.

Great to have you here.

So I mean, this is the big day after the market closed and then Monday, we'll see the prices reflect the 10 for one split.

This is not the first time we've seen a split for NVIDIA nor a A mag seven company over the past year.

So all of these things considered what makes this one different.

Yeah, first, thanks for, thanks for having me.

It's probably gonna be a handful of people that opened their account on Monday and didn't see this coming and I wonder what happened.

But uh for, for those paying attention, I think, you know, one of the big things uh that you see generally with a stock split and it's to be expected with a, with a stock that's, that's hit 33 trillion uh market cap is that it, it does let more investors into the stock.

And that can sound like a good thing.

And generally speaking, it is great to open up, uh you know, the ability for, for more people to invest in, in, in a great company like NVIDIA.

The downside of it is though, is that it large share prices, you usually our position for institutional investors who tend to be more long term and, and their decision making is long term.

And so they're not as visceral in the reactions to maybe an earnings release or some other news event that would cause them to, you know, sell out of an entire position relative to retail investors, uh who would buy in and, and they might have a more emotional attachment to the stock, both buying and selling.

So that can lead to heightened volatility as you start to dilute the institutional buyers, introduce more retail investors that like I said can be a little bit more quick and emotional with their buying and selling decisions uh of a stock like this, NVIDIA has been the poster child for much of the A I fueled gains that we've seen over the course of the last year and change.

And so many people are trying to figure out as well.

Does it make sense if they're not invested right now to potentially add to the portfolio come this stock split as it looks to be more affordable, at least on price value.

Right.

Yeah, I mean, obviously the, the whole A I trade has, has gotten a lot of traction and if you have been out of it, it's probably difficult to watch these stocks that have doubled, tripled quadrupled.

So it, it, it probably will open up investors who have sat on the sidelines.

Now, keep in mind any investor who has, you know, a holding in in the S and P 500 through an ETF or something like that, they do still own it piece of it.

So I hope investors kind of keep that in mind when they're trying to decide whether they want to, you know, buy this individual stock.

But I think, you know, one thing to look at is this is a stock that has already priced in a lot of that upside.

And so what we're trying to do is find the other areas to play machine learning artificial intelligence in a way that can complement what NVIDIA is providing with their chip set because, you know, right now that is a one trick pony.

They, they are GP us that help with the whole, you know A I processing.

But there are a lot of other companies that are using machine learning to enhance their current business model.

And that's where we're starting to focus as we start to, you know, sell our positions in NVIDIA because we have cut, as we've seen the stock go up and up and up, we're prudent in taking, taking gains.

And right now we've, we've just about halved our, our position in NVIDIA.

That's interesting, Adam.

And uh and so now, as you're looking at what we could maybe summarize as an A I field broadening, then some of the other companies that can either be beneficiaries or uh as we've heard from some of our prior guests, looking at things like utilities that are gonna have to power data centers, all the things that are kind of interconnected into where this demand is really pushing the broader market as well.

What are some of the plays that you're considering?

Yeah.

So it's important to understand that obviously the whole A I I is is growing and it's not totally certain how big it is right now and how big it can get.

Um but we do know that it is going to be a large market, I think no matter what, uh there's a lot of unknowns in A I.

But the one known is that it is real and it is going to be a very, very large market.

So we're looking at a way to play like you said, uh one way is obviously with, you know, introducing increased complexity uh in technology and how we use technology that also increases the risk from cyber attacks.

And so I think that if you're looking for themes within A I, you can't ignore cybersecurity as a whole and there are a few different ways to play it.

But right now I'm really like crowd strike.

They are one of the leaders within the space and using machine learning to have a more advanced version of cybersecurity.

Uh The valuation is a bit rich so be careful there.

Uh But I still like the stock.

I like the trajectory.

I like the business momentum, not just the stock momentum because they do have uh a wide mode.

Their, their acquisition cost for customers is the lowest in the space.

So that's one of the reasons I like crowdstrike.

Additionally, you've seen uh Qualcomm come out with some new chip sets that kind of compliment uh artificial intelligence and this is in laptops and other devices that can help with.

You just said that the power consumption of them.

And so I think that's a big piece.

It's looking at all the different ways to slice this up and you can find winners not just in one stock because that's really the, the, the way to be careful here is to diversify away from the concentration.

We know A I is going to continue to grow, but staying in one company can create some difficulties.

So spreading those bets out and like say Qualcomm crowds strike and then we also like alphabet.

That's a more van and a but obviously a big player in the A I space.

Yeah, Adam we only got about 30 seconds left here.

Should investors be concerned about the short bets that are growing against right now?

About $34 billion according to S3 partners?

I mean, do you think about how that compares to the $19 billion against apple $18 billion against Tesla?

You can essentially combine those two and still be in the ballpark of the short positions that have mounted with NVIDIA.

What do you make of that?

Absolutely.

And it's just like the, the, the stock split is something like that can add to the volatility.

You can actually add to the upside.

If there's a short squeeze, you could see a large pop in the stock, but also it does increase the risk to the downside.

So I think it's just something to be careful of something to be aware of in your position sizing.

Remember that this is a high volatility stock.

It's been going up and up and up and the volatility has been the upside, but that same thing can happen to the downside.

So just make sure you protect yourself with managing your position sizing Adam Koons, who's the Winthrop Capital Chief Investment Officer, Adam.

Great to see you.

Thanks so much for joining the show with us tonight.

Certainly.