As investors gear up for 2024, one of the most captivating developments has been the resurgence of stock splits. These maneuvers typically follow robust business performance, leading to substantial stock price appreciation. Though stock splits don’t affect a company’s intrinsic value, they are often implemented to maintain affordability for the average retail investor.
A glance at the past few years unveils a pattern of high-profile companies engaging in stock splits, including:
- Amazon: 20-for-1 split in June 2022
- DexCom: 4-for-1 split in June 2022
- Shopify: 10-for-1 split in June 2022
- Alphabet: 20-for-1 split in July 2022
- Tesla: 3-for-1 split in August 2022
- Palo Alto Networks: 3-for-1 split in September 2022
- Monster Beverage: 2-for-1 split in March 2023
- Celsius Holdings: 3-for-1 split in November 2023
A glimpse at the top performing stocks from last year gives compelling indications that more stock splits might be in the offing in 2024.
Image source: Getty Images.
Potential Contenders
1. Nvidia’s AI Dominance
Nvidia (NASDAQ: NVDA) is renowned for revolutionizing the graphics processing units (GPUs) that bring virtual realities to life in video games. Over time, the firm has adapted its chips to fuel cloud computing, data centers, and most recently, generative artificial intelligence (AI).
Data compiled by New Market Research reveals that Nvidia currently commands around 95% of the market for processors used in machine learning, an early variant of AI. This positions the company favorably to lead in the generative AI domain as well.
Recent financials corroborate this outlook. For its fiscal 2024 third quarter (ended October 29), Nvidia achieved record revenue of $18.1 billion, a 206% increase year over year, while its diluted earnings per share (EPS) of $3.71 surged by 1,274%. Though comparisons were skewed due to tepid results from the prior year, they underscore the ample growth runway ahead.
Nvidia has a rich history of impressive growth. Excitement surrounding its AI-fueled performance propelled the stock up by 239% in 2023. The surge is even more conspicuous over the past decade, with revenue skyrocketing by 1,480% and driving net income up by 6,190%. This surging growth has propelled Nvidia’s stock price up by over 13,650% to $531 as of the latest market closure. Despite this performance, Nvidia still trades at a reasonable price-to-earnings-to-growth (PEG) ratio of less than 1, the barometer for an inexpensive stock.
The company’s most recent stock split was announced in May 2021 when the stock was trading at about $600 per share, just 13% above its current price. If the prevailing trajectory persists, it is likely that Nvidia will declare its next stock split before long.
2. Microsoft’s AI Foray and Beyond
Microsoft (NASDAQ: MSFT) is famed for its Office suite of productive tools and its omnipresent Windows PC operating system. However, the company made a decisive leap into the generative AI arena last year. After acquiring a substantial stake in ChatGPT parent OpenAI, Microsoft unveiled Copilot, a suite of AI-driven assistants designed to streamline mundane, time-consuming tasks. These moves sparked the ongoing AI race.
Big Tech Giants Leverage AI for Explosive Growth
Microsoft’s Azure Cloud experienced robust growth in the third quarter, fueled in large part by a soaring demand for its AI tools. The tech giant’s fiscal 2024 first-quarter earnings revealed a 13% year-over-year revenue growth and a 27% surge in earnings per share. Although the impact of Copilot’s general release in November is yet to reflect in the financial statements, Microsoft’s prescient AI strategy has undoubtedly buoyed its financial performance.
Microsoft’s AI-Powered Ascendancy
Over the past decade, Microsoft has amassed a remarkable track record of 177% revenue growth, propelling net income up by a staggering 294%. This phenomenal growth has not only garnered a 57% surge in stock price in 2023 but has also seen the stock catapult nearly 817% over the last decade. With a current stock price of approximately $376, trading at 33 times forward earnings, the company’s historic growth warrants a merited premium.
Although Microsoft has refrained from stock splits since 2003, its shares have now hit a new all-time high, being priced at more than double the historical ceiling. The company’s AI potential remains largely untapped, indicating further potential stock price gains in the offing. Given its impressive growth trajectory, 2024 could be the year Microsoft joins its tech counterparts in pursuing a stock split.
Meta Platforms’ AI Resurgence
The year 2023 marked a significant turnaround for Meta Platforms (NASDAQ: META) as it embarked on a remarkable recovery buoyed by a multitude of catalysts. A potent combination of a stringent cost-cutting drive, a revival in digital advertising fortunes, and a strategic pivot to AI propelled Meta’s stock price up by a whopping 194%.
Meta’s adeptness at leveraging its longstanding AI expertise was exemplified by the swift development and monetization of Llama AI, credited with stimulating the surge in digital ad spending. With forecasted debuts of Llama AI 2 and Llama 3 in the near future, Meta’s prospects appear even more promising.
The third quarter saw Meta’s revenues surge by 23% year over year to $34.1 billion, with its EPS skyrocketing by 168%. As the digital advertising space is set to regain its momentum, Meta’s growth trajectory is poised for an upsurge. The year 2024 may witness Meta joining its counterparts in executing a stock split, given its history of unwavering growth, bolstered by its harnessing of AI capabilities.
Big tech giants have harnessed the power of AI to drive their financial ascendency, setting the stage for further expansion and delighting investors. The road ahead is paved with tantalizing possibilities, as these companies look set to harness AI as a pivotal growth catalyst.