Stock splits have dominated headlines in the financial world during 2022, with some of the largest companies on the market using the unconventional move to help shore up their share prices. Amazon, Tesla, Shopify, and Google parent company Alphabet have all announced their intention to split this year, and it's only April.
Despite stock splits triggering a positive reaction from investors, it's important to focus on the merits of the companies themselves rather than the short-term cosmetic share price adjustment, especially while the stock market remains volatile.
Beyond the popular names splitting their stock, there's one company you might consider buying and holding forever. It has a leadership position in the hypergrowth semiconductor sector, and it could be one of the largest companies in the world one day.
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What stock splits are, and what they aren't
As an example, e-commerce giant Amazon currently trades at a share price of $3,055. Retail investors with smaller amounts of money shy away from owning a stock like that, because its high price would occupy a disproportionate share of their portfolio. At least that's the school of thought in the financial community.
Amazon recently announced a 20-for-1 stock split, which would reduce its share price to just $152. The idea is to make it more attractive to retail investors, which would theoretically result in more money flowing into Amazon stock and therefore boosting its overall value.
Put simply, stock splits are a cosmetic adjustment designed to attract smaller investors, but they're certainly not a value-add to the underlying business. Therefore, stock splits definitely aren't a worthy reason to buy shares in a particular company, even if such an announcement offers a short-term boost in price.
The growth stock to buy now and hold forever
The semiconductor industry is on track to reach $1 trillion in annual value by 2031, thanks to everyday consumer products becoming increasingly intelligent. Household electronics, smartphones, and even cars require more computing power than ever before, but new-age technologies like autonomous driving and virtual reality have triggered surging demand for advanced chips.
Nvidia (NVDA -3.33%) is one of the most sought-after global chip producers that makes these technologies possible. Its gaming and data center segments generate the lion's share of its revenue, but Nvidia is evolving into so much more than just a semiconductor hardware company. Its smaller segments are home to its most exciting opportunities in the metaverse and self-driving technology, and that's where the long-term value could be.
Nvidia's Omniverse platform is now a leading collaborative tool for creators of virtual reality environments, whether it's for games or industrial purposes. Large companies are adopting Omniverse to create digital versions of their real-life assets with millimeter accuracy, enabling them to reconfigure production processes in a virtual environment before committing to physical amendments.
With emerging new industries like the metaverse inching closer to reality each day, Omniverse holds significant promise for Nvidia's business.
Nvidia is also a leader in autonomous driving, and it has built an $8 billion sales pipeline already with some of the world's largest automakers. In 2024, brand new Mercedes Benz models will hit the road featuring Nvidia's self-driving technology, and they'll be joined soon after by cars from Tata Motors' Jaguar and Land Rover.
Why Nvidia is a buy now
Amid the broad tech sell-off, Nvidia stock has dipped 37% and that sets up a great buying opportunity for investors.
By some estimates the metaverse could be a $30 trillion opportunity in the next decade, and that's just one application for Nvidia's Omniverse. It has already signed major customers like Amazon and PepsiCo to its Omniverse Enterprise platform, and recently expanded the ecosystem tenfold to include new third-party integrations.
The autonomous driving industry is set to exceed $2.1 trillion in value by 2030, and Nvidia is jostling for a leadership position in the development of that technology, quickly becoming a go-to provider that automakers can't operate without.
The company's annual revenue topped $26.9 billion in 2021 mainly from semiconductor sales, but as the above figures suggest, its futuristic opportunities beyond hardware could see Nvidia dwarf that figure. Plus, the company is profitable with $4.44 in earnings per share last year, so it carries far less risk than other high-growth tech stocks right now.
Put simply, Nvidia has built a robust, diversified business that is set up for an even more explosive future. Don't get distracted by all the stock-split hype, Nvidia is a great buy right now and could grow to become a "forever" piece of your portfolio.
