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AI and Stock Splits: Big Moves by Apple and Nvidia

Plus500 | Tuesday 11 June 2024

Big Tech news is shaking the markets today. Two of the biggest names in the industry, Nvidia and Apple, are making moves that may give traders and investors alike plenty to chew on as trading opens in New York and in the days to come. Let’s take a look:

An illustration of an AI chip

Apple Takes A Bite Out of AI

At the Worldwide Developers Conference (WWDC) in California on Monday, June 10th, Apple (AAPL) unveiled its highly anticipated generative AI initiative, Apple Intelligence. Marking Apple's first foray into the buzz-worthy generative AI field, this technology will be seamlessly integrated across the company's hardware and software ecosystem, including iPhone, Mac, Mail, Messages, and Photos.

Unlike broad-based AI systems like ChatGPT or Google's AI Overview, Apple Intelligence is designed to uniquely understand users and their data. Moreover, this fall, Apple Intelligence will be available for the iPhone 15 Pro, iPads, and Macs with M1 series and later generation chips.

Furthermore, Apple's iconic digital assistant, Siri, is getting a makeover. According to the firm's top brass, the voice-powered virtual assistant will sound more natural and be more responsive with the integration of Apple Intelligence. Users can expect a more interactive experience with the ability to ask follow-up questions, interrupt requests, and even use typed text for commands. Additionally, Siri will support ChatGPT for certain tasks, offering flexibility beyond Apple's proprietary models.

Apple also emphasises that many of its generative AI models will run on-device, ensuring privacy and security. For tasks requiring cloud access, Apple has developed Private Cloud Compute servers, leveraging Apple Silicon's built-in privacy features. This approach ensures that no personal information used for Apple Intelligence requests is stored in the cloud.

Tech market watchers as well as industry peers, such as Microsoft (MSFT), Google (GOOG), and Meta (META), may be watching closely to see how smooth Apple Intelligence's rollout will turn out to be. These latter firms continue to advance their own generative AI offerings, which have faced some initial hiccups in the past. However, Apple's reputation for security and reliable software means any flaws in its generative AI efforts could impact its brand significantly and affect the broader perception of generative AI technology.

The company’s Apple Intelligence is set to launch in September, giving the company time to refine and perfect its offering before it reaches consumers. As of the time of writing, Apple shares have increased 5.4% in value so far over the four weeks. (Source: Yahoo Finance)

Nvidia’s Stock Split: What Does It Mean?

June 11th had some further developments in store for those keeping an eye on the American tech industry. Nvidia (NVDA) opened the trading day on Monday after a 10-for-1 stock split. This split means that those in possession of Nvidia shares as of June 5th received 10 shares for each existing share they held, making Nvidia stock more affordable without diluting the overall value of holdings.

Stock splits lower the price per share, making them more accessible to retail investors. Some experts hold that the split makes Nvidia more attractive to retail traders, especially given the high prices of its options due to the stock’s previous valuation, which had come in at over $1,000.

Nvidia's market valuation briefly surpassed $3 trillion on June 5th, positioning it as the second-most-valuable publicly traded U.S. company, trailing only Apple. The company’s shares have surged due to the booming interest in Nvidia’s generative AI, which began with the launch of OpenAI’s ChatGPT in late 2022. Tech giants like Amazon (AMZN), Google, and Microsoft are eager to secure Nvidia’s hardware to power their AI platforms, driving Nvidia's revenue significantly higher.

In the first quarter, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, representing increases of 461% and 262%, respectively, compared to the same period last year. Nvidia’s Data Center revenue grew 427% year-over-year to $22.6 billion, making up 86% of the company's total revenue for the quarter. Meanwhile, its gaming segment, once the core of its business, generated $2.6 billion in revenue.

Stock splits are generally seen as “a sign of strength,” often leading to stock outperformance. According to Bank of America (BAC) experts, stocks that split typically rise by an average of 25% in the year following the announcement, compared to the S&P 500’s 12% average return in the same period. Nvidia shares have already increased by more than 28% since the split was announced on May 22nd, 2024.

As Nvidia moves forward, competitors like AMD (AMD) and Intel are advancing their AI hardware and product roadmaps to challenge Nvidia’s dominance. Moreover, Nvidia's customers, including Meta and Tesla (TSLA), are in the process of developing their own chips to reduce dependency on Nvidia’s products. Whether the firm's stock split will assist it in maintaining its current market position amid the industry competition rapidly taking shape remains to be seen.

In Conclusion

The tech world is abuzz with innovations and rapidly-advancing technologies, and those at the helm of the industry's biggest firms are adjusting their business strategies. With these latest moves by Apple and Nvidia, traders as well as industry peers may be taking note, but how further developments could affect both these two companies' fortunes on Wall Street trading floors as well as the tech sector as a whole is as yet unclear; traders will have to stay abreast of the latest developments. 

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