Throughout the annals of economic history, investors have fixated on pioneering technologies or trends that promise immense financial gain. The ascent of the internet, the advent of business-to-business commerce, and the evolution of cloud computing are just a few mega trends that have ensnared the imaginations of investors over the decades.
Occasionally, however, dual hot trends vie for Wall Street’s undivided attention. In the year 2024, we’ve borne witness to the confluence of the artificial intelligence (AI) revolution and stock-split mania elevating the major indexes of the stock market to record-closing altitudes.
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A stock split serves as a tool that publicly-traded companies can employ to cosmetically adjust their share price and outstanding share count by a designated factor. These share price adjustments, while cosmetic in nature, hold no bearing on a company’s market capitalization or operational performance.
Among the various types of stock splits, forward and reverse, the spotlight predominantly falls on companies executing forward stock splits. While reverse splits, leading to an escalation in share price, are typically instigated from a standpoint of operational fragility, enterprises initiating forward splits consistently outperform their rivals in terms of innovation and operational proficiency.
Since the inception of 2024, slightly over a dozen noteworthy companies have unveiled and/or concluded a stock split. Traditionally, the majority of these high-profile splits have leaned towards the forward type, aiming to render shares more financially manageable for the everyday investor.
Given the meteoric rise of AI stocks in 2024, it comes as no surprise that some of the most notable stock splits belong to leading AI enterprises. The much-anticipated AI stock split of the fourth quarter will take center stage after the conclusion of trading on September 30.
Leading the Charge: Nvidia and Broadcom as Pioneering AI Stock Splits of 2024
Over the preceding four months, Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) have dominated headlines within the realm of artificial intelligence stocks – and rightfully so.
On May 22, Nvidia stole the spotlight by becoming the first AI stock to declare its intention to split its shares. Post a surge of over $2 trillion in Nvidia’s market capitalization within less than 17 months, the company’s board sanctioned a 10-for-1 forward split, which materialized following the conclusion of trading on June 7.
Nvidia’s monumental valuation surge can be attributed to its early-stage hegemony in the AI-graphics processing unit (GPU) realm. Nvidia’s sundry GPUs, notably the exceptionally popular H100, command a virtual monopoly in enterprise AI-accelerated data centers.
Investor anticipation is palpable regarding the impending launch of the next-generation Blackwell GPU architecture, which exhibits significantly advanced energy efficiency compared to its precursor chip, elevating its efficacy in hastening a myriad of computations encompassing generative AI solutions to quantum computing paradigms. Nvidia staunchly invests in innovation, ensuring its sustenance of AI-GPU computing supremacy in the foreseeable future.
Concurrently, AI networking specialist Broadcom unfurled its maiden stock split in mid-June. This 10-for-1 forward split came into effect post the cessation of trading on July 12.
Similar to how businesses bank on Nvidia’s hardware for serving as the bedrock of high-compute data centers, Broadcom’s networking solutions are indispensable for curtailing response times for requests – a pivotal element for AI-infused software and systems – while maximizing the computational capability of AI GPUs.
Despite Broadcom’s rapid expansion being fueled by its AI solutions, it boasts a significantly diversified revenue stream contrary to leading AI entity, Nvidia. As an illustration, it stands as one of the premier providers of wireless chips and peripherals deployed in next-gen smartphones. The perpetual device-replacement cycle propelled by the 5G upheaval has proven to be a boon for Broadcom.
While Nvidia resonated as the apex AI stock-split entity during the second quarter, and Broadcom’s split commanded attention in the third quarter, a fresh AI stock split is primed to relish its moment under the limelight.
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The Long-Awaited Arrival: Unveiling Wall Street’s Most-Anticipated AI Stock Split of the Fourth Quarter
Upon the termination of after-hours trading on September 30, the formidable customizable rack server and storage solutions provider – Super Micro Computer (NASDAQ: SMCI) – will culminate its inaugural split since its emergence into the public domain over 17 years ago. Following in the footsteps of Nvidia and Broadcom,
The Unveiling of Super Micro Computer’s AI Success and Upcoming Challenges
Super Micro’s split is 10-for-1, resulting in a nominal share price of approximately $40 per share.
Super Micro’s shares have surged by a staggering 779% over the past two years, buoyed by the robust demand for AI infrastructure. The company recorded remarkable sales growth, more than doubling to $14.9 billion in fiscal 2024. CEO Charles Liang envisions annual sales climbing to $50 billion, a testament to the company’s ambitious growth trajectory.
One of the driving forces behind Super Micro’s success is the integration of Nvidia’s highly sought-after H100 GPUs into its AI-centric rack servers. This strategic hardware choice has positioned Super Micro as a go-to solution for businesses aiming to outpace competitors and secure a strategic advantage.
However, Super Micro faces a dual-edged sword. While Nvidia’s H100 GPUs are immensely popular in AI-accelerated data centers, their overwhelming demand has led to significant backlogs. This reliance on Nvidia’s AI-GPUs exposes Super Micro to the risk of potential supply shortages, impacting its ability to meet client demands effectively.
Moreover, there looms the shadow of uncertainty surrounding the AI industry, with concerns over a possible bubble burst. History teaches us that hyped technologies often face a reckoning, and the rapid adoption of new trends typically falls short of initial expectations. As many businesses grapple with deriving value from AI investments, there are valid fears that artificial intelligence could be the next overhyped bubble awaiting a reality check.
Notably, alleged accounting irregularities by Super Micro, raised by noted short-seller Hindenburg Research and a U.S. Justice Department probe, have cast a shadow over the company’s financial integrity. A delayed annual report filing, despite assurances from CEO Liang, has left investors jittery about potential undisclosed concerns.
As Super Micro Computer embarks on its awaited stock split, the investing community braces itself to witness where sentiment aligns on the company’s future trajectory.
Exploring Investment Opportunities in Super Micro Computer
Before considering an investment in Super Micro Computer, prudent investors should factor in the following:
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.