The Daily Breakdown looks at Nvidia’s rally to a $3 trillion market cap, as it pushes past Apple and makes history.
Thursday’s TLDR
- Nvidia becomes the second-largest US stock…
- And its 10-for-1 stock split is coming soon.
- Lululemon beats on earnings.
What’s happening?
Up in seven of the last nine trading sessions, Nvidia stock has been on fire since it reported earnings on May 22. Now up 29% in that span, the move has been enough to vault the company’s market cap above $3 trillion.
That makes Nvidia the second largest company, putting it just above Apple and not that far behind Microsoft’s $3.15 trillion valuation.
Now trading above $1,200 a share, Nvidia stock has gotten pretty pricey. However, that’s set to change on Monday after its 10-for-1 stock split goes into effect on Friday after the close.
Remember, a stock split doesn’t actually change the value of a stock — it just changes its share price and the number of shares.
Picture a Hershey’s chocolate bar. When it’s whole, you have one bar of chocolate, right? But when you break it into all the little pieces, you now have a bunch of little smaller pieces, but still the same amount of chocolate. That’s sort of like a stock split.
One share of Nvidia at $1,200 has the same value as 10 shares at $120 apiece.
As it pertains to options, the stock split will also make Nvidia much more approachable. With its current share price, the options prices are incredibly expensive, keeping most investors on the sidelines or forced to use debit spreads to reduce the cost.
With the split, Nvidia’s options prices will become much more reasonable, unlocking a bit more flexibility for investors.
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The setup — DELL
Like Nvidia, Dell shares have been scorching higher thanks to enthusiasm around AI. Unlike Nvidia though, Dell stock did not have a good reaction when it reported earnings in late May.
Shares fell more than 17% the day after it reported and recorded a two-day 22.3% loss. However, the stock is starting to find some support around a key area.
With the fall, Dell stock has dipped to a prior area of resistance near $130, as well as the 50-day moving average. For now, this zone is holding as support.
If it continues to hold, bulls want to see a rebound. Above the post-earnings high near $145 and the stock could gain even more upside momentum. However, if support fails and Dell breaks below the $127.50 level, more downside could be on the way.
Options
For options traders, calls or bull call spreads could be one way to speculate on support holding. In this scenario, options buyers limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a bounce in the stock.
Conversely, investors who expect support to fail could speculate with puts or put spreads.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
ASML — Shares of Dutch chip firm ASML surged 8.1%, the stock’s highest close since March 7. With the rally, ASML overtook LVMH in market value, making it Europe’s second-largest listed company for the first time.
BTC — Bitcoin surged past $71,000, marking its fifth straight gain. Market confidence is growing in a Fed rate cut later this year, while Bitcoin is being boosted by significant ETF inflows. It’s still contending with a key technical level, too.
LULU — Shares of Lululemon Athletica have been struggling, falling 35.6% from its prior earnings report in March to Wednesday close. After the close, the retailer reported earnings, this time with the stock having a better reaction. The firm beat expectations and while Q2 guidance was still light, management’s full-year outlook was reassuring.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.