Many top technology stocks have completed stock splits in recent years, from Amazon to Alphabet, as their shares roared higher. The move involves a company issuing additional shares to current holders in order to lower the price of each individual share. This doesn’t change the market value of the company or the value of your investment — but it’s positive for the company because it makes the stock more accessible to a broader range of investors.
And for investors, a stock split often signals that a company has been doing well and management expects the momentum to continue — and that could, once again, drive up the shares over time. So it’s worth taking a close look at stock-split companies, as some might make interesting long-term investments.
Companies that make great candidates for a split often are active in a high-growth industry and have seen their shares climb quickly, even reaching the $1,000 mark. This is the case for two artificial intelligence (AI) stocks right now. They haven’t announced a split, but I wouldn’t be surprised if they do so in the near future, thanks to their incredible performance over the past few years. Let’s take a closer look at these AI stocks that look ready for a split.
1. Nvidia
Nvidia (NASDAQ: NVDA) stock has climbed 500% over the past three years as the company established its position as the world’s AI chip giant. The company sells graphics processing units (GPUs) that power the most crucial steps in any AI project: the training and inferencing of AI models. This allows those models to then do what we’d like them to do, such as solve complex problems.
The tech giant’s GPUs initially were known for powering video games and graphics, but the introduction of programming platform CUDA made it easy to use GPUs for general computing — and this opened the door to using them for AI. Now, instead of generating most of its revenue from the video game business, Nvidia instead generates it from the data center business. Last year, revenue and profit soared in the triple digits, and considering we’re in the early days of the AI boom, growth could continue.
Nvidia has split its stock five times in the past, with the most recent operation happening in 2021 after the stock posted a period of gains — and at that point, the shares traded for less than $250.
This year, Nvidia stock has climbed higher than $900, bringing it very close to the $1,000 level — one that could dissuade some investors from buying the stock. Right now could be a great moment for this AI star to launch a stock split due to the current stock price and due to the fact that a new growth driver could be just ahead. The company plans on releasing its new Blackwell architecture and chips later this year, and growth from that platform could supercharge Nvidia stock.
2. Super Micro Computer
Super Micro Computer (NASDAQ: SMCI) has skyrocketed, even surpassing Nvidia when it comes to share performance in recent times. The stock has soared more than 2,200% over the past three years and climbed beyond $1,000 earlier this year before dipping to the current level of about $940.
Like Nvidia, Supermicro has seen its revenue stream transform thanks to demand for AI. The 30-year-old company, a maker of servers, full rack scale solutions, and other equipment, announced its first $3 billion quarter ever just recently as AI customers flocked to its products. Supermicro works closely with top chipmakers including Nvidia so that it can quickly integrate their products into its platforms, and this has kept demand soaring to records. It also means that Supermicro benefits from not only its own new product releases, but the new chip releases from all the big chip companies — from Nvidia to Intel and Advanced Micro Devices.
Customers also like Supermicro’s products because they are specifically tailored to their needs, and the company’s building blocks manner of construction means it can quickly fill orders.
Supermicro’s earnings have soared in recent times, and the company has made moves to maximize its economies of scale to keep the good times rolling. The tech giant is doing this by expanding production, with a new Malaysia facility to focus on lower costs and higher volume.
Supermicro has never split its stock, but now would be the perfect time to launch such an operation, considering the stock’s price today — and the potential for a new wave of growth ahead.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
Stock-Split Watch: 2 Artificial Intelligence (AI) Stocks That Look Ready for a Split was originally published by The Motley Fool