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Here’s why Nvidia stock is down 90%

Here's why Nvidia stock is down 90%
Elmaz Sabovic

Owners of Nvidia (NASDAQ: NVDA) stock and attentive investors might be surprised when trading begins on June 10, as the NVDA share price has dropped 90% to $120.89. However, this decline is less alarming than it seems.

NVDA stock 24-hour price chart. Source: Finbold
NVDA stock 24-hour price chart. Source: Finbold

This price readjustment is not a consequence of the stock market crashing down but a part of a preplanned Nvidia 10-for-1 stock split that has been in effect since the market closed on June 7 and was announced at the latest earnings call on May 22.

Why did Nvidia do a stock split?

Nvidia’s stock has risen 3,174% over the past five years and 218% in the last year. During this impressive run, Nvidia’s market cap surpassed that of Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG). Before the 10-for-1 split, the stock price was a lofty $1,209.

A high price was likely out of reach for many investors, especially the retail investors the split aims to attract. By making shares more affordable, the stock split not only enhances Nvidia’s appeal but also values the participation of retail investors, broadening its investor base.

This move was partly about investor perception, suggesting it was likely influenced by appearance and could boost market cap gains.

NVDA stock split could be a double-edged sword

Another potential, though unlikely, concern is the impact on retail investors the split aims to attract. Individually, retail investors may hold small amounts of Nvidia stock, but collectively, they can account for a significant portion of shares.

Any sudden shifts in their views on the company can have a notable effect. The influence of retail investors is evident from the currently unfolding GameStop (NYSE: GME) saga.

However, even if an unwelcome scenario occurs, it wouldn’t alter the strong market trends and impressive fundamentals supporting the chipmaker.

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