Will Nvidia Keep Going Up in 2024 as Stock Split Chatter Grows?

Nvidia (NVDA) stock hit yet another record high yesterday, and its market cap briefly surpassed that of Amazon (AMZN) in the process. We are only about midway into February, and Nvidia shares have already soared 46% year-to-date - making it the best-performing stock on the S&P 500 Index ($SPX) so far in 2024.

For Nvidia, the rally seems to have taken off from where it left off last year. With gains of 240%, it was the best-performing S&P 500 stock in 2023, also. Last year, the company became the first chip designer to command a market cap of $1 trillion, and has now hit the milestone of $1.5 trillion in 2024. Now, not even a $2 trillion market cap looks out of bounds for NVDA, looking at the market sentiments.

At the same time, a section of the market – which includes valuation guru Ashwath Damodaran – believes that the rise in Nvidia stock has gone too far. Can Nvidia stock continue to rise in 2024, and will the company consider a stock split after its breathtaking rally? We’ll explore in this article.

Will Nvidia Stock Keep Going Up in 2024?

Looking at Nvidia’s consensus target price of $675.52, it seems that Wall Street does not expect the stock to rise any higher. However, the Street-high target price of $1,100 implies that the stock has still room to keep running.

Notably, brokerages have gradually raised Nvidia’s target price over the last year following the company’s earnings releases – which, to put it simply, have been stellar. Nvidia is set to report earnings again later this month, and we might see analysts raise their target prices yet again.

It is not uncommon for shares to trade above their target prices, with Tesla (TSLA) being a prime example. The Elon Musk-run company has traded above its consensus target price often, especially when the stock sees upward momentum.

Is Nvidia Stock Starting to Get Overvalued?

While Nvidia has been an undeniable beneficiary of rising investment interest in the artificial intelligence (AI) space, a section of the market is now getting apprehensive about the company’s valuation. On one level, we have those who seem to believe that the AI euphoria will eventually bust – and so will Nvidia’s soaring revenues from selling AI chips.

Then we have those who believe that soon enough Nvidia won’t have the kind of “home run” advantage that it has enjoyed over the last year, as competitors also come up with chips to match that of Nvidia.

Damodaran Believes Nvidia is Quite Overvalued 

Aswath Damodaran believes that the entire “Magnificent 7” pack is overpriced, while stressing that “Nvidia stands out as particularly overpriced.” Incidentally, Damodaran prefers Apple (AAPL) and Tesla out of the group. However, on Apple, analysts don’t seem to agree with the New York University finance professor; three brokerages downgraded the stock last month, which is quite a rarity for the iPhone maker.

For those who have been following Damodaran for a while, his finding Tesla stock attractive might come as a surprise. In the past, his valuation for Tesla stock used to be way below the stock’s then-target price.

Damodaran said that he plans to sell some Nvidia shares, while adding that he halved his holdings last year, as well. In his tweet, the “dean of valuation” said, “there is no point having an investment philosophy, if you don't act on it.”

To be sure, the kind of valuations that Nvidia now trades at would not make the stock a fit for value investors like Damodaran. However, for those chasing growth, I believe Nvidia is a long-term buy-and-hold story. While the stock could (and ideally should) correct from these levels, the long-term growth story remains intact.

Should Nvidia Split Its Stock in 2024?

Even as analysts and valuation gurus debate over how much Nvidia is actually worth, several retail investors are now speculating on an NVDA stock split. For context, when Nvidia announced its most recent stock split in July 2021, its stock price was in the ballpark of $750 – similar to its intraday highs yesterday.

After the mammoth tech sector rally of 2023 – which has extended into 2024, as well – some investors are calling for top performers like Nvidia and Meta Platforms (META) to split their shares. Notably, while Nvidia has split its shares on five occasions since its 1999 listing, Meta hasn’t ever split its shares since listing as a public company back in May 2012.

To be sure, a stock split does not have any impact on a stock’s fundamentals, apart from aiding positive sentiments and an expected increase in trading volumes. That said, markets perceive a stock split as a positive, and usually, we'll see a stock go higher following the announcement of a stock split.

Overall, I believe as Nvidia stock continues to scale new highs, the board will eventually consider a stock split - which could only add to the euphoria among retail traders.