The craze for artificial intelligence (AI) has boosted the stock market this year, and few companies have benefited more than Nvidia (NASDAQ: NVDA)In the months since ChatGPT launched in November 2022, sparking a tidal wave of demand for AI-enabled hardware, the chipmaker’s stock price has soared 800%

Nvidia was the best performing stock in the S&P 500 in 2023, and it could repeat the feat in 2024. It once again leads the S&P 500, and its gains this year are outpacing those of the number two Prospect by 34 percentage points.

Nvidia announced a 10-for-1 stock split in May and completed it in June to “make stock ownership more accessible to employees and investors.” But based on historical patterns, Nvidia shares could fall in the coming months.

Historically, stocks that have been split have outperformed the S&P 500

Stocks that split tend to outperform the S&P 500, at least temporarily. Since 2010, shares of such companies have risen an average of 18% during the 12-month period following their stock split announcements, according to Bank of AmericaMeanwhile, the S&P 500 returned an average of 13% per year over the same period.

We can apply that information to Nvidia to speculate on its future performance. More specifically, the stock is up 30% since Nvidia announced a stock split in May. So based on the broad averages, that leaves an implied downside of 12% through May 2025. However, the outlook is significantly worse when we use company-specific data.

Historically, Nvidia shares have performed poorly following stock splits

Before the most recent split, Nvidia had completed five stock splits since going public on January 22, 1999 at a price of $12 per share. Generally, these events were bad news for shareholders in the short term, as shown in the table below.

Data source: YCharts.

Nvidia shares have fallen an average of 23% in the 12 months following previous stock splits. The shares were still down an average of 3% 24 months after that.

The chipmaker completed its most recent split after the market closed on June 7, and shares began trading at a split-adjusted price of $120.37 on June 10. The stock has returned 2% since then, giving it an implied downside of 25% through June 2025 and an implied downside of 5% through June 2026.

The story continues

Past performance is never a guarantee of future results, but investors should extrapolate to historical data in this situation. I say that because most of Nvidia’s stock splits in the past have occurred within 12 months of a recession, and all have occurred within 24 months of a recession. Few stocks generate positive returns during economic downturns.

Nvidia’s second-quarter earnings release will be a high-stakes event

Nvidia is best known for its graphics processing units (GPUs), powerful chips that can perform many types of calculations faster and more efficiently than central processing units (CPUs). GPUs are particularly suited for computing tasks such as rendering graphics, training machine learning models, and running artificial intelligence (AI) applications.

Nvidia dominates those markets. The company accounted for 98% of data center GPU shipments last year, according to a survey by analysts at TechInsights, and its market share in AI processors ranges from 70% to 95%, analysts say. But the company’s true formidability comes from its full-stack computing platform, which includes hardware, software and services. That makes Nvidia a one-stop shop for AI.

It reported stellar financial results in the first quarter of its fiscal 2025 year (ended April 28), with revenue rising 262% year-over-year to $26 billion amid unprecedented demand for its generative AI chips and networking hardware. Meanwhile, non-GAAP earnings soared 461% to $6.12 per diluted share, easily beating Wall Street estimates.

The company is scheduled to report second-quarter results on August 28, and Wall Street expectations are sky-high. Analysts are expecting revenue and non-GAAP earnings growth of 112% and 137%, respectively. That would make Q2 the fifth consecutive quarter of triple-digit percentage growth on the top and bottom lines. Additionally, management is likely to address rumors that shipments of next-generation Blackwell GPUs will be delayed.

The combination of high expectations and uncertainty surrounding Blackwell GPUs means that the upcoming earnings release will be a high-stakes event for Nvidia shareholders. Indeed, option pricing data implies price action of 11%, meaning the data suggests the stock could rise or fall by that much in the trading session following the report.

That puts investors in a tricky position. Would they be wiser to buy shares now and risk a loss, or to buy shares later and risk missing out on gains? The most prudent course of action would be to split the difference. Investors interested in adding Nvidia stock to their portfolios could buy a small position today if they’re comfortable with volatility. If the stock drops significantly after earnings, they could consider adding to their position.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool has a disclosure policy.

Nvidia’s stock has risen 30% since it announced its 10-for-1 stock split. History says that’s what’s going to happen now. was originally published by The Motley Fool