Why Nvidia Stock jumped today

What happened

Nvidia (NASDAQ: NVDA) climbed 4.3% on Wednesday, following its 4-to-1 stock split on Tuesday.

So what

Stock splits do not change the fundamental value of a business. A 4-for-1 split is in many ways like trading a $ 1 bill for four quarters. The total value is the same; it’s just divided into several pieces.

Nonetheless, traders tend to get excited about stock splits, which can have a positive impact on the price of a stock before the split. After the split, however, traders often take the opportunity to record short-term profits. And many investors, who now own more stocks, take the opportunity to sell part of their holdings and earn long-term profits.

These short-term price dynamics have appeared to be impacting Nvidia’s shares in recent weeks. Its share price has risen 25% since the announcement of its stock split on May 21 through July 19. And after the July 20 split, shares of Nvidia fell 3.5% before ending the day down around 1%.

Image source: Getty Images.

Now what

Now that the split has occurred, investors appear to be focusing on Nvidia’s fundamental growth drivers once again. And in this regard, the future of Nvidia looks bright. Growing demand for its chips in booming markets, such as data centers and games, is driving revenue and profits sharply. While this is expected to remain the case for the foreseeable future, today’s gains may be only part of a much larger upward movement in the Nvidia share price in the years to come.