Nvidia will start trading today around 120$ after the 10:1 stock split. Let's see what is a stock split and how it works.

In order to increase the share's liquidity and make it more affordable, a corporation may split its existing shares into many shares, a move known as a stock split. Because the split adds no actual value, even though the number of shares outstanding rises, the shares' total dollar worth stays the same. In essence, a stock split results in an increase in the company's share count but also a corresponding decrease in share price.

How does it work?

  • Announcement: A stock split with a specified ratio (such as 2-for-1, 3-for-1, etc.) is announced by the corporation.
  • Change of Share Count: The split ratio is multiplied by each shareholder's share count.
  • Share Price Adjustment: The split ratio is used to divide the market price of the shares.
  • Market Capitalization: Following the split, the company's overall market capitalization stays the same.

Let's see an example with Nvidia's 10-for-1 stock split:


  • A shareholder has 100 shares.
  • A share costs $1200.
  • Shares total worth is equal to 100 shares * $1200, or $120,000.


  • A 10-for-1 split is announced.
  • 10 shares are divided from each share.
  • Now, the shareholder has 1,000 shares.
  • One share now costs $120 (1200 / 10).
  • Shares total worth is equal to 1000 shares * $120, or $120,000.

What makes the stock split historically positive?

Sign of confidence:

Stock splits are usually announced by companies after a major increase in share price. This could be seen as an indication that the business is optimistic about its chances for future growth.

Enhanced liquidity:

The number of outstanding shares rises when the stock is split, which may enhance liquidity. More shares at a reduced price could draw in more investors, even retail ones who might have been crowded out previously.

Perceived bargain:

Reduced share prices may increase demand by making the stock seem more accessible to small investors. Investors may view a company priced at $50 as more affordable than one priced at $200, despite the fact that the stock's fundamental remains the same.


Historical evidence shows that stocks often do well after a split, owing to increased investor interest and psychological impact. This can result in a self-fulfilling prophecy in which growing demand drives prices upward.