In recent years, stock splits have regained ground as a favored maneuver among well-performing companies. Once a common practice in the 1990s, stock splits have resurfaced as a strategy for firms boasting impressive financial metrics, particularly in the realm of artificial intelligence (AI). Notably, these splits often manifest following substantial stock price surges, reflecting company success and investor enthusiasm.
Data from Bank of America highlights a promising trend: firms undergoing stock splits frequently see their stock prices rise by an average of 25% in the year following the split announcement, significantly outperforming the 12% average return of the S&P 500 during the same period.
Here, we delve into three AI-driven companies that have recently executed stock splits and are still primed for significant growth, according to expert analysts on Wall Street.
Broadcom: Potential Upside of 57%
First on our list is Broadcom (NASDAQ: AVGO), a powerhouse in the semiconductor and software space. The company has diversified its offerings across key sectors, including cable, mobile, and data center technology. Remarkably, it’s estimated that a staggering 99% of internet traffic relies on Broadcom technology.
In its latest fiscal quarter, Broadcom reported an impressive 43% year-over-year revenue growth, amounting to $12.5 billion. Despite the weight of its recent acquisition of VMWare, which has impacted profits temporarily, the company is bullish about its future. It has raised its revenue forecast to $51 billion for the year, projecting growth surpassing 42%.
Broadcom’s robust performance and strategic moves culminated in a 10-for-1 stock split in mid-July. Analysts continue to show confidence in the stock, with a recent target price set by Rosenblatt analyst Hans Mosesmann at a split-adjusted $240, indicating a potential gain of 57% from its recent closing price.
Nvidia: Impressive Upside of 85%
Next, Nvidia (NASDAQ: NVDA) has been making headlines as the leading producer of GPUs that have defined the industries of gaming, cloud computing, and data centers. In particular, Nvidia’s technology has become essential for generative AI’s processing needs, solidifying its position in this innovative field.
The company recently reported a record revenue of $30 billion for its second quarter, representing a remarkable 122% increase compared to the previous year. The data center segment alone saw revenue soar 154%, driven predominantly by AI-related products. Nvidia’s stock has skyrocketed 639% since the beginning of the previous year, further validating its 10-for-1 stock split conducted in June.
Rosenblatt’s Hans Mosesmann has reiterated his buy rating and elevated his price target to an astounding $200, suggesting an 85% upside potential based on the stock’s closing price. Wall Street analysts maintain a bullish outlook, with 92% recommending a buy.
Super Micro Computer: Astounding Upside of 240%
Finally, Super Micro Computer (NASDAQ: SMCI) has positioned itself as a significant player in custom server design for over three decades. Known for its cutting-edge rack-scale servers and direct liquid cooling technology—imperative for contemporary AI data centers—Supermicro is forecasting substantial growth.
Last quarter, the company recorded a staggering $5.3 billion in revenue, marking a 143% year-over-year increase. While the recent scrutiny regarding accounting practices has unsettled some investors, Supermicro’s management has calmed fears and reinforced confidence in its financial performance.
Despite the market’s reaction to the short-seller attack, analysts are largely dismissive of these concerns. Loop Capital’s Ananda Baruah maintains his buy rating, with a lofty target price of $1,500 on Supermicro, reflecting an impressive potential upside of 240%.
Conclusion: Investing in AI Stock Splits
Investors should note that while these companies are associated with high growth potential, they also carry valuations reflective of their thriving business models. Nvidia, Broadcom, and Supermicro exhibit price-to-earnings ratios of 38, 32, and 13, respectively, compared to the S&P 500’s 29.
This noteworthy growth trajectory driven by the AI revolution positions these stocks as potentially lucrative investments worth watching. As these dynamic companies push forward in the rapidly evolving tech landscape, they continue to attract significant attention from investors keen on capitalizing on future gains.
In light of this information, it’s essential for investors to conduct thorough research and consider their options carefully. Maintaining an eye on market trends and expert analyses can provide invaluable insights into making informed investment decisions in the AI sector.