AI Market Momentum: Potential Stock Splits and Investment Insights

The text explores the trend of stock splits among leading AI companies, highlighting potential candidates ASML and Equinix due to their growth in the AI market. It explains the investor appeal of stock splits and provides investment insights, including the potential returns of past Motley Fool recommendations.
SummaryThe text discusses the prominence of AI stocks in the current bull market and the trend of stock splits among these companies. Major players like Nvidia and Broadcom have already implemented 10-for-1 stock splits, with others like Super Micro Computer and Lam Research following. While stock splits do not change a company’s fundamentals, they are often seen positively by investors and can lead to stock outperformance. The text highlights two AI stocks, ASML and Equinix, as potential candidates for future stock splits. ASML, a leader in semiconductor lithography equipment, and Equinix, a data center REIT, are both experiencing growth due to AI advancements. The text concludes with investment considerations, noting that ASML was not listed among the top 10 stocks recommended by Motley Fool’s Stock Advisor, though past recommendations have yielded substantial returns.

The Rise of AI Stocks and Potential Splits

In the current bull market, artificial intelligence (AI) stocks have emerged as frontrunners. As a result, stock splits have become a common occurrence among AI-focused companies. Heavyweights like Nvidia and Broadcom have recently executed 10-for-1 stock splits, and other significant players are following suit. Super Micro Computer, a manufacturer of AI servers, will implement its 10-for-1 split on October 1, while Lam Research has scheduled a similar split for October 2.

As more AI stocks experience rapid growth, several candidates in the sector appear ripe for stock splits. While these splits do not alter the fundamental value of a company, they are often welcomed by investors. A stock split effectively resets the share price, potentially providing a fresh opportunity for the stock to climb. Research suggests that stocks frequently outperform in the year following a split, possibly due to management’s confidence in continued momentum.

The following are two AI stocks that could soon split their shares.

Potential Stock Split Candidates

1. ASML Holding N.V.

ASML (down 3.97%) stands as the preeminent producer of lithography equipment, the intricate machines essential for semiconductor production. With clients like Taiwan Semiconductor Manufacturing Company, Samsung, and Intel, ASML holds a unique position as the sole manufacturer of extreme ultraviolet (EUV) machines, crucial for crafting the most advanced chips.

ASML’s dominant role in the semiconductor sector has led to a market capitalization exceeding $300 billion and a share price approaching $800. This places the company in an ideal position for a stock split, as its individual share price ranks among the highest in the market.

Historically, ASML has executed stock splits, though its last traditional split occurred in 2000 with a 3-for-1 ratio. In 2007, it implemented an 8-for-9 reverse split alongside a special dividend, and in 2012, it conducted a synthetic buyback paired with a 77-for-100 reverse split. Given the AI-driven growth, another stock split seems plausible if ASML’s stock continues its upward trajectory.

2. Equinix, Inc.

Equinix (up 0.71%) diverges from the typical AI stock profile. As a real estate investment trust (REIT) and the world’s largest data center REIT, it offers investors a unique angle on the AI boom. Although its growth rates are generally modest, the surge in AI-driven data centers presents a substantial growth opportunity.

In the second quarter, Equinix reported a 7% revenue increase, reaching $2.2 billion, and achieved over $1 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first time at $1.04 billion. The company is actively expanding, with 54 major projects underway and the acquisition of a 200-acre parcel in Atlanta to support larger AI and hyperscale workloads in the U.S.

Equinix, with a current share price around $860, seems well-positioned for a stock split. Although it has never executed a traditional stock split, it did conduct a reverse split in 2002, adjusting from $1 to $32 after the dot-com bubble burst. While Equinix hasn’t matched the recent gains of other AI stocks, a stock split could enhance its appeal to retail and novice investors eager to enter the AI sector.

Investment Considerations for ASML

Before investing $1,000 in ASML, weigh this information:

The Motley Fool’s Stock Advisor analyst team recently identified what they consider the 10 best stocks for investors to purchase now, and ASML was not among them. The selected stocks have the potential for substantial returns in the coming years.

For perspective, Nvidia made this list on April 15, 2005. If you had invested $1,000 at that time based on their recommendation, your investment would have grown to $710,860!

Stock Advisor offers investors a straightforward guide to success, including portfolio-building strategies, regular analyst updates, and two new stock picks each month. Since 2002, the Stock Advisor service has more than quadrupled the return of the S&P 500.

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Margaret "Maggie" Turner
Margaret "Maggie" Turner

Margaret "Maggie" Turner: The Television Chronicle

Margaret Turner, affectionately known as Maggie, is a veteran journalist whose illustrious career in TV entertainment news spans over three decades. At 50, her keen insights and nuanced understanding of the television industry have made her a respected figure among colleagues and readers alike. With her signature brown hair and an ever-present twinkle in her eye, Maggie brings both warmth and wisdom to her work.

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