Several companies may try to replicate Nvidia's post-distribution success.
Artificial Intelligence (AI) Superstar Stock Nvidia (NVDA 1.75%) Announced a stock split on May 22 this year. The share price has risen 36% since then. Some other AI companies on Wall Street in wild success may also consider following suit (even if the distribution isn't necessarily the only reason behind the stock's performance).
Remember, a stock split doesn't change anything about the underlying business or the fundamentals of the stock. It simply splits the stock into more shares with proportionally lower prices and per-share financials. Companies distribute their stock for a number of reasons, including to make it easier for employees (who can receive them as stock options in exchange for payment) and for investors to buy and sell shares.
With Nvidia finalizing its stock split on June 10, the question naturally arises: What AI companies could be after the stock split? Three Fool.com contributors were identified. Microsoft (MSFT 0.22%), Meta platforms (Meta 0.11%)And Super Microcomputer (SMCI -3.05%) As those are the most likely AI stocks to split next.
Here's why.
The venerable tech giant appears poised for a split.
Will Haley (Microsoft): As the company that until recently had the most valuable market cap in the world, Microsoft is not a surprising candidate for a stock split. Given how much stock prices have seen over the past few years, the surprising thing about Microsoft stock is that it's been more than 21 years since Microsoft last distributed its stock.
Between the late 1980s and early 2000s, when the Microsoft PC operating system dominated the company, stock splits were much more common. During that period, the stock split nine times.
However, the dot-com market crashed and then boomed apple Microsoft's leadership declined over time, especially when it launched the iPhone in 2007. Between 2000 and 2014, when Steve Ballmer was CEO, Microsoft stock lost 37 percent of its value.
The company's fortunes finally improved when Satya Nadella took over as CEO in 2014. It redefined Microsoft as a cloud company and, later, as a leader in AI. During Nadella's 10-year tenure, Microsoft stock has risen more than 1,110%, taking it to $440 per share as of this writing.
MSFT data via YCharts
Given this level of stock price growth, the need for distribution also increased. The company's growth suggests that stock prices are likely to continue to rise. In the first three quarters of fiscal 2024 (ended March 31), net income grew 26 percent year-over-year. The company's outlook for the rest of the fiscal year also points to double-digit percentage revenue growth.
Another factor pointing to a stock split involves being a component of Microsoft. Dow Jones Industrial Average. Because the Dow is price-weighted, Microsoft will likely need to diversify its stock so as not to have too much of an impact on the index's movements. This should ensure that the 21-year stock split drought is finally over.
MetaPlatforms has never issued a stock split, but the time may finally be here.
Jack Lerich (MetaPlatforms): all in all, 2024 has already happened. A great one The year for “Magnificent Seven” stocks. In fact, six out of seven (Tesla The only exception is) has recorded double-digit percentage growth year-to-date. Yet of these stocks, only one has ever split its shares: Meta platforms. The time has come for this first distribution. Here's why.
The first Close, the stock is expensive. One Meta share trades for around $504. — Keeping stock Out of reach for many retail investors. by the Implementing a 3-for-1 or even 5-for-1 stock splitMeta could significantly reduce its share price. And Make the stock more accessible to retail investors who might otherwise not be able to buy fractional shares Price A more reasonable range of $100 to $175.
Oh Recent studies from Bank of America Another compelling reason to split Meta's shares was revealed: outperformance. The study, which examined stock distributions since 1980, found that Stocks that were split. defeated S&P 500 During the 12 months following the distribution. I was true. Each of me last four decades (see chart below).
Image source: Statista
While many investors expect a meta-stock split, it's far from a given. Meta's management is not a fan of stock splits. I Its 12 years as a public companyMeta never distributed stock.. This is in stark contrast to other tech megacaps. Adobe And Microsoftwhich split their shares four and seven times respectively in the first 12 years of their existence as public companies.
At any rate, investors should keep a close eye on meta platforms. Stock split or not, the company is one of the top-performing tech stocks thanks to its lucrative digital advertising business. With its Q1 revenue growing at a 27% year-over-year rate and earnings growth of 127%, long-term investors would be wise to consider Meta a buy and hold candidate.
Super Microcomputer may choose to fuel its rally with a stock split.
Justin Pope (Super Microcomputer): For a while, the supermicrocomputer was apparently the AI ​​version of Robin to Nvidia's Batman. But share prices stalled and fell after topping out at $1,229. Meanwhile, Nvidia continues to soar to new heights. Here's why the supermicrocomputer, or supermicro as it's also known, can still get back on track, requiring a stock split.
The company sells modular server systems for data centers. This is great for companies that don't have the expertise or time to customize and want to deploy compute as quickly as possible. Like Nvidia, Supermicro has become a “go-to” choice with AI spending on the rise. You can see below how revenue growth has accelerated to 200% year-over-year, with management noting that demand for its products has dramatically outpaced the broader industry. Leaving behind.
SMCI Revenue (Quarterly YoY Growth) data via YCharts
Evidence suggests that Supermicro may benefit from data center tailwinds for some time. According to Newmark, AI will drive enough demand for data centers to double their power consumption from current levels by 2030. Super Micro has generated nearly $12 billion in revenue over the past 12 months. Analysts believe annual revenue could double to more than $23 billion by next June.
Meanwhile, the company has a healthy outlook for revenue growth. Analysts expect earnings per share to grow by an average of 52% annually over the next three to five years. In other words, AI tailwinds remain, and core strength should eventually raise the stakes. Today, the stock trades at a forward P/E of 33, making it a bargain if Super Micro realizes such strong earnings growth. These catalysts could supercharge supermicrocomputers, an exciting prospect for investors.
So why split the stock?
The company has never distributed its stock despite its shares appreciating more than 9,400% since its IPO. Now, trading above $800 per share, the stock is harder to buy and sell (less liquid). It is difficult for investors to buy shares slowly over time without tons of money. Employees sitting on lucrative equity in the company should sell in chunks when the shares trade at such a price. Splitting stock lowers the share price and mitigates these problems. In addition, the positive attention that stock splits typically generate can help the share price move again after shares have stalled in recent weeks. It's a potential win-win for everyone.
Bank of America is the advertising partner of The Motley Fool Company. 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. Jack Lerich has positions at Adobe, Nvidia and Tesla. Justin Pope has no positions in any stocks. Will Haley has no positions in any stocks. The Motley Fool holds positions in and recommends Adobe, Apple, Bank of America, MetaPlatforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.