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NVIDIA Corporation (NVDA): Stock Split Analysis and Market Outlook
By Tolstoy Justin | November 8, 2024
Equity research report on NVIDIA with a strong buy rating and 12-month price target of $750.
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Equity Research Report Overview
This comprehensive equity research report provides an in-depth analysis of NVIDIA Corporation (NASDAQ: NVDA), a semiconductor industry leader in artificial intelligence and accelerated computing. The report examines the company's strategic stock split announcement and evaluates its sustained market momentum, supporting a STRONG BUY rating.
Stock Split Analysis: Historical Context and Implications
  • Historical Context: Examine NVIDIA's past stock split events and their impact on share price and market performance.
  • Valuation Implications: Analyze how stock splits can affect a company's valuation, trading volume, and investor perception.
  • Market Dynamics: Discuss how NVIDIA's stock split decisions may influence the broader semiconductor and technology sectors.
Split History and Valuation Impact

1

2

3

4

5

6

1

June 2000
2:1 split

2

September 2001
2:1 split

3

April 2006
2:1 split

4

September 2007
3:2 split

5

July 2021
4:1 split

6

June 2024*
10:1 split (announced, pending approval)
NVIDIA's stock split history demonstrates a strategic approach to managing its share price over the past two decades, with multiple splits ranging from 2:1 to the recently announced 10:1 split.
Split History and Valuation Impact
Cumulative Split Factor
NVIDIA's split strategy has resulted in a cumulative split factor of 480, effectively reducing the theoretical share price from $72,000 to the current $150.
Valuation Impact
The stock splits have allowed NVIDIA to maintain retail investor accessibility while preserving institutional appeal, as demonstrated by the theoretical $72,000 share price without splits.
Financial Performance and Market Position
  • Consistent Revenue Growth: NVIDIA has demonstrated strong and consistent revenue growth, driven by its leadership in key market segments like data center and gaming.
  • Expanding Profit Margins: The company's profitability has also improved over time, with expanding gross and operating margins reflecting its operational efficiency and pricing power.
Revenue Growth and Margin Analysis
NVIDIA reported impressive Q3 FY2024 revenue of $18.12 billion, a remarkable 205% year-over-year increase. The company's non-GAAP gross margin stood at 74.0%, while its non-GAAP operating margin reached a robust 58.5%, showcasing its strong operational efficiency and profitability.
Segment Performance: Data Center
$14.51B
Revenue
+279% Y/Y growth
Dominant
Market Share
In AI training infrastructure
The data center segment has seen accelerated adoption of generative AI and large language models, driving a 279% year-over-year revenue increase to $14.51 billion. NVIDIA maintains a dominant market share in AI training infrastructure.
Segment Performance: Gaming
Revenue Growth
Gaming revenue reached $2.86 billion, an 81% year-over-year increase.
Market Leadership
NVIDIA maintains a leadership position in high-performance gaming GPUs.
Growth Drivers
Ray tracing and DLSS technologies are key growth catalysts for the gaming segment.
Segment Performance: Gaming
Technology Leadership
Superior AI training and inference capabilities, advanced semiconductor design expertise, and comprehensive software ecosystem (CUDA).
Market Positioning
Estimated 95% share in AI training chips, strong partnerships with cloud service providers, and expanding presence in automotive and edge computing.
Industry Dynamics
Growing AI infrastructure demands, cloud service provider capital expenditure expansion, and emerging edge AI applications.
Risk Assessment
NVIDIA faces regulatory risks from export restrictions to China, semiconductor industry regulations, and potential antitrust considerations. Market-specific risks include semiconductor cycle volatility, supply chain dependencies, and competitive pressure from vertically integrated solutions.
Valuation risks include NVIDIA's premium multiple relative to semiconductor peers, high expectations for AI market growth, and macro sensitivity to interest rates.
Competitive Advantages

Technological Leadership
NVIDIA's cutting-edge GPU technology and AI expertise give it a significant edge in the rapidly evolving semiconductor market.

Diversified Revenue Streams
The company's exposure to high-growth markets like data centers, gaming, and autonomous vehicles provides stability and multiple avenues for growth.

Ecosystem Dominance
NVIDIA's robust software and hardware ecosystem, including CUDA and the NVIDIA AI platform, solidifies its position as an industry leader.
Risk Assessment: Primary Risk Factors
Valuation Concerns
NVIDIA's premium valuation of 25.5x forward P/E and 22.3x EV/EBITDA may limit upside potential if growth slows.
Competitive Landscape
Intensifying competition in the AI and gaming markets could impact NVIDIA's market share and pricing power.
Macroeconomic Risks
A potential economic downturn could affect demand for NVIDIA's products and services across its key end markets.
Regulatory Challenges
Changes in government policies or regulations could create headwinds for NVIDIA's business operations.
Valuation Analysis: Key Metrics
Our $750 price target is based on a 25x forward P/E multiple on FY2025 estimated earnings, reflecting NVIDIA's market leadership, financial strength, and strategic position in the AI infrastructure market.
Investment Thesis and Recommendation
  • Strong Buy Rating - NVIDIA's fundamental position in AI acceleration and strong execution support our STRONG BUY recommendation.
  • Premium Valuation Justified - While NVIDIA trades at premium multiples, its market position and growth trajectory justify current valuations with potential for further upside.
Conclusion and Disclosures
  • This analysis is for informational purposes only and should not be considered as investment advice.
  • Market conditions and company performance can change rapidly. Investors should conduct their own due diligence before making investment decisions.
  • All calculations and projections are based on publicly available information and analyst estimates as of November 8, 2024.
  • Historical stock split data has been verified through SEC filings and company announcements.