Despite the ongoing hype surrounding artificial intelligence (AI) on Wall Street, stock splits have emerged as a significant trend this year, generating considerable excitement among investors. A stock split allows a company to adjust its share price and the number of outstanding shares without altering its overall market capitalization or financial performance. Investors typically focus on forward stock splits, which aim to make a company’s shares more affordable—an attractive option for those unable to purchase fractional shares.
In 2024, numerous prominent companies have either announced or implemented stock splits, primarily in the forward category. However, the sentiment toward certain stocks within this sphere appears mixed, particularly as high-profile billionaires shift their portfolios. Recent filings reveal a notable pattern: while several billionaire investors have started selling their stakes in Nvidia (NASDAQ: NVDA), they are increasingly drawn to two other high-growth stocks that have executed stock splits.
Billionaires are backing away from Nvidia, a leader in AI graphics processing units (GPUs), which has seen consistent reductions in holdings by influential money managers over the past few quarters. In the latest quarter, notable sell-offs included:
- Ken Griffin, Citadel: 9,282,018 shares
- David Tepper, Appaloosa Management: 3,730,000 shares
- Stanley Druckenmiller, Duquesne Family Office: 1,545,370 shares
- Cliff Asness, AQR Capital Management: 1,360,215 shares
The trend of selling Nvidia is not solely about profit-taking after its largest forward split in June. Investors appear to be wary of Nvidia’s increasing competition, particularly with rivals like Advanced Micro Devices (AMD) rapidly advancing in the AI GPU space. Additionally, major clients of Nvidia are reportedly developing their own graphics solutions, seeking to reduce dependence on the AI giant. With ongoing delays in crucial product releases and a history of insider selling—none of Nvidia’s executives have purchased shares since December 2020—billionaires are likely reassessing their positions in the company.
On the flip side, attention has shifted to two compelling stocks that have gained favor among billionaire investors: Super Micro Computer (NASDAQ: SMCI) and Broadcom (NASDAQ: AVGO).
Super Micro Computer has rapidly ascended in popularity due to its specialized offerings in customizable rack servers and storage solutions. In a recent quarter, six billionaire investors recognized the company’s potential, opting to accumulate shares as its stock approached new highs. Super Micro is uniquely positioned to benefit from the growing demand for AI infrastructure as companies invest heavily in training models and deploying generative AI applications. This shift in the tech landscape has propelled its net sales to an impressive $14.9 billion, showcasing exceptional market demand.
However, Super Micro faces challenges as it relies on Nvidia’s H100 GPUs for its servers amidst supply chain difficulties and an ongoing investigation by Hindenburg Research into potential accounting issues. Despite these headwinds, the fundamentals continue to signal strong growth prospects.
Broadcom, another standout stock favored by billionaire investors, is known for its extensive range of AI networking solutions. With the ongoing shift towards AI, Broadcom’s technology is essential for optimizing the performance of interconnected AI GPUs. In addition to its foray into AI, Broadcom boasts diverse revenue streams from next-generation smartphones and essential optical components for automated machinery, making it a robust player in the tech industry. The company also recently completed a 10-for-1 forward split, further attracting investor interest.
Billionaires are increasingly viewing Broadcom as a safer bet than Nvidia, especially given its proven track record of strategic acquisitions. Notably, its recent acquisition of VMware enhances Broadcom’s capabilities in private and hybrid cloud services, setting the stage for future growth opportunities.
For savvy investors looking to navigate the evolving landscape of technology stocks, the recent movement of billionaires away from Nvidia and towards Super Micro Computer and Broadcom signifies shifting tides. While the allure of AI remains palpable, diversifying into companies with solid operational foundations and growth prospects like these may be the key to capitalizing on the next wave of innovation.
As always, it’s essential to conduct thorough research before making investment decisions. Monitoring market trends and understanding the implications of stock splits can provide investors with an edge in a competitive landscape.