According to Reuters, speculation has been swirling about whether NVIDIA, a leader in artificial intelligence, could be added to the Dow after its 10-to-1 stock split, which was intended to attract retail investors.
A company’s market value remains unchanged when its number of outstanding shares is increased through a split. The company may be displaced from its current position as the index’s least weighted company, Intel Corporation (NASDAQ:INTC), according to experts, as it follows Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) into the Dow Jones Industrial Average.
Following a 27% gain since last month’s announcement of a split and strong outlook, Nvidia shares fell 0.2% on Monday. Last week, Nvidia surpassed Apple to become the second-largest firm in the world, according to market value, surpassing even Microsoft Corporation (NASDAQ:MSFT).
Such price spikes following a split are similar to the “hangover effect,” so analysts predict that investor buying activity will wane this week. According to them, institutional investors have more capital to trade with, and smaller lots and more trading volume, so stock splits entice individual investors.