Contents
The Role of AI and Stock Splits in 2024’s Market Surge
Artificial intelligence (AI) has been a driving force behind the record-closing highs of the three major U.S. stock indexes in 2024. Not far behind, the buzz around stock splits has also been instrumental in boosting valuations.
Understanding Stock Splits
A stock split allows a publicly traded company to adjust its share price and the number of outstanding shares by the same proportion, without affecting its market capitalization or operational performance.
There are two main types of stock splits: reverse-stock splits and forward-stock splits. Reverse-stock splits, which are less popular, are typically used by struggling companies to increase their share price and comply with major stock exchange listing requirements. Conversely, forward-stock splits make shares more affordable for individual investors and employees lacking access to fractional shares. This type of split is often utilized by companies with significant competitive advantages.
Since late January, over a dozen high-profile companies have announced or completed stock splits, with nearly all opting for the forward-split approach.
Nvidia and Broadcom: AI Powerhouses in 2024
Nvidia and Broadcom have been among the most anticipated stock splits of 2024, yet they will soon share the stage with two new AI stock-split stocks.
AI’s Economic Impact
According to a 2023 PwC report titled “Sizing the Prize,” AI could contribute $15.7 trillion to the U.S. economy by 2030, driven by productivity gains and consumer demand. Given this vast potential, it’s no wonder Nvidia and Broadcom have attracted significant attention.
Nvidia’s Dominance
Nvidia’s market value soared by over $2 trillion since early 2023, leading to a historic 10-for-1 forward split, effective on June 7. Nvidia’s GPUs are the preferred choice for businesses developing generative AI solutions and training large language models (LLMs). TechInsights reported that Nvidia controlled approximately 98% of all GPU shipments to data centers in 2022 and 2023, highlighting its near-monopoly in the AI-GPU market. Additionally, Nvidia’s CUDA software platform fosters client loyalty by providing the necessary toolkit for developers to maximize their GPU usage.
Broadcom’s Networking Expertise
Broadcom, akin to Nvidia, excels in AI networking solutions. Its offerings optimize data centers’ tail latency and computing capacity. Although AI is currently the primary driver of Broadcom’s sales growth, the company boasts a diverse revenue stream, including wireless chips for next-gen smartphones, optical components, networking products for vehicles, cybersecurity, and cloud solutions for businesses.
While Nvidia and Broadcom remain leaders in the AI sector, two emerging AI stock-split stocks are poised to take the spotlight.
Super Micro Computer: The Infrastructure Expert
Super Micro Computer, a specialist in customizable rack server and storage solutions, is set to join the 2024 stock-split class. The company announced a 10-for-1 split in early August, effective after trading closes on September 30. This marks its first split since going public in March 2007.
Super Micro’s Role
Super Micro supports businesses aiming to expand their high-compute data centers. The company experienced a 110% increase in net sales in fiscal 2024 and projects 87% sales growth for the current fiscal year. Its popularity stems from incorporating Nvidia’s H100 into its servers, although backlogged orders may hinder customer satisfaction.
Challenges and Concerns
Super Micro has faced unmet growth expectations, as seen in the mid-2010s when high hopes for its infrastructure solutions were unsustainable. Historically, significant technological advancements require time to mature, and AI is unlikely to be an exception. Furthermore, the company is under investigation by the U.S. Justice Department following a Hindenburg Research report alleging accounting manipulation. Despite Super Micro’s attractive valuation, it still has much to prove to investors.
Lam Research: A Key Player in Semiconductor Fabrication
Lam Research, a semiconductor wafer fabrication equipment company, is set to share the AI stock-split spotlight with Nvidia and Broadcom. The company approved a 10-for-1 split and a $10 billion share repurchase program on May 21, with the split occurring after trading closes on October 2.
Lam’s Contributions to AI
Lam provides the equipment necessary for semiconductor companies to produce AI solutions, particularly high-bandwidth memory (HBM) for AI-accelerated data centers. As demand for GPUs and HBM rises, so does the need for Lam’s equipment.
Economic and Regulatory Challenges
Despite steady growth, Lam faces challenges. U.S. regulators have restricted AI-related chip and equipment exports to China, a crucial market accounting for 39% of Lam’s sales in the June-ended quarter. If regulatory constraints persist, Lam’s growth potential could be limited. Additionally, looming recession concerns and the cyclical nature of the AI industry may impact Lam’s future order activity.
Seizing Investment Opportunities
Feeling like you’ve missed out on successful stock investments? Our expert analysts occasionally issue “Double Down” stock recommendations for companies poised for significant growth. If you feel you’ve missed your chance to invest, now might be the perfect time to act. Here are some past success stories:
– Nvidia: A $1,000 investment in 2009 would now be worth $314,874!
– Apple: A $1,000 investment in 2008 would have grown to $44,078!
– Netflix: A $1,000 investment in 2004 would have reached $382,503!
Currently, we have “Double Down” alerts for three promising companies, and opportunities like this don’t come often.
Explore 3 “Double Down” stocks ›
Stock Advisor returns as of 10/02/2024
