Over the past 30 years, Wall Street has had no shortage of next big trends that have attracted investors. At the moment, nothing is capturing the attention of professional and everyday investors like artificial intelligence (AI).
AI, which involves the use of software and systems to perform tasks normally supervised by humans, is being applied in almost every field and industry. This is why PwC analysts believe that AI has the potential to add $15.7 trillion to global gross domestic product by 2030.
Nvidia has become the infrastructure of the AI revolution.
Over the past year, megacap Nvidia (NASDAQ: NVDA ) has led the charge among the artificial intelligence repertoire. This has become the basic structure of the AI movement. The company’s A100 and H100 graphics processing units (GPUs) are the brains of high-compute data centers that allow AI software and systems to make discrete decisions.
Since the start of 2023, Nvidia’s share price has nearly quintupled, with the company closing in on $1.5 trillion in additional market cap, all thanks to AI. With enterprise demand especially high for the company’s AI-accelerated chips and supply still tight, Nvidia has enjoyed unusually strong pricing power, driving much of its sales growth. has happened
But with Nvidia shares closing at $726 last week, the prospect of a stock split may be starting to look more appealing.
A “stock split” is an event that allows a publicly traded company to change both its share price and outstanding share count without affecting its market cap or operating performance. Think of it as a purely cosmetic change that could either make the company’s shares nominally more affordable to everyday investors, as with a forward stock split, or ensure continued listing on a major exchange. can increase the company’s share price, as with the reverse. – Distribution of stock. Nvidia will be looking at its second forward distribution in the past three years.
However, Nvidia isn’t the only high-flying AI or AI-related stock that looks poised for a potential stock split. Following are three AI companies that could beat this GPU juggernaut to the punch and become Wall Street’s next stock split.
Meta platforms
The first artificial intelligence stock that could beat Nvidia to the punch and become Wall Street’s next split stock is none other than the social media juggernaut. Meta platforms (NASDAQ: META ). Meta has never issued a stock split, but its share price hit $490 last week.
Meta is using AI in different ways in its various products. In addition to helping to find and eliminate inappropriate posts made on its social media platforms, it leans heavily on generative AI to help businesses tailor their ads to consumers.
Meta is investing heavily in AI and virtual/augmented reality probably won’t result in significant sales growth for years. Meanwhile, it continues to earn about 98 percent of its revenue from advertising. The company’s social media real estate, which includes Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads, leads the world, with nearly 4 billion collective monthly active users in the quarter ending in December. Meta should have no problem commanding exceptional ad pricing power more often than not.
Something else to note about Meta Platforms is that it is a cash flow machine. It generated more than $71 billion in net cash from operations last year, and it closed 2023 with more than $61 billion in cash, cash equivalents, and marketable securities. It’s this treasure chest that allows CEO Mark Zuckerberg the luxury of taking risks, including developing Meta’s own AI chips.
Super Microcomputer
Another AI-fueled company that could become Wall Street’s next stock split ahead of Nvidia is a server and storage solutions specialist. Super Microcomputer (NASDAQ: SMCI ). Like MetaPlatforms, SuperMicro never issued a stock split. However, with its stock briefly surpassing $1,000 per share last week, a forward split may be under consideration.
Supermicrocomputer’s doubling of sales this year is a function of its highly customizable and energy-efficient rack-scale servers, which are in high demand. It’s also a reflection of the company’s reliance on Nvidia’s AI-powered GPUs in its products. Businesses looking to use AI to increase their long-term growth potential and reach are increasingly turning to Super Micro.
It remains to be seen whether the supermicrocomputer can sustain its near-exponential returns over the past two weeks. Shares were up 183% on a year-to-date basis late last week, and are up 878% year-to-date since the start of 2023. Historically, every next big investment over the past 30 years has endured an initial bubble. This means that investors have a terrible habit of overestimating the use of new technologies or innovations. AI will likely share this fate.
Another challenge for SuperMicro is whether it can maximize demand for its rack-scale solutions in AI-accelerated data centers. Because SuperMicro relies on Nvidia’s GPUs, it’s at the mercy of its suppliers. But if SuperMicro can somehow meet or exceed Wall Street’s already lofty growth expectations, a stock split could well be in the cards.
Broadcom
A third artificial intelligence stock that could leapfrog Nvidia and become one of Wall Street’s next stock splits is the semiconductor giant. Broadcom (NASDAQ: AVGO ). Before Avago acquired Broadcom in 2016 and kept its name, Broadcom completed three divestitures. But Evago had never distributed its stock. As of February 16, Broadcom was returning $1,245 a share to shareholders.
Broadcom is reaching out in some ways to incorporate AI. It added AI features to its Trident networking processors, and in April 2023 introduced its Jericho3-AI chip for AI networks. Jericho3 is a must-have for high-performance data centers as it is designed to connect up to 32,000 GPUs. In short, it is designed to handle rapid workloads in enterprise data centers.
One factor that has definitely worked in Broadcom’s favor is its juicy backlog. Although CEO Hock Tan failed to provide an update on Broadcom’s backlog in fiscal 2023 (the company’s fiscal year ends at the end of September), the company has a record total of $31 billion in mid-2022. Got a backlog. Wall Street and investors love big backlogs, because it usually leads to highly predictable operating cash flows.
But some investors should keep in mind that Broadcom generates a significant portion of its revenue from wireless chips and accessories used in smartphones. While the segment should continue to provide modest growth and plenty of cash flow for Broadcom, it could, ultimately, hold back the company’s overall growth rate, given how big a role it plays in net sales.
With one of the highest nominal-dollar share prices on Wall Street, Broadcom is a logical candidate to split its stock.
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Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in the Meta Platforms. The Motley Fool has positions and recommends MetaPlatforms and Nvidia. The Motley Fool recommends Broadcom and Super Microcomputer. The Motley Fool has a Disclosure Policy.
Forget Nvidia: These 3 Artificial Intelligence (AI) Stocks Could Be The Next Stock Split Originally Posted by The Motley Fool