Several companies could try to replicate Nvidia's success after its separation.
Artificial Intelligence (AI) Superstar Stocks NVIDIA (NVDA 1.75%) announced a stock split on May 22 of this year. Share prices have risen 36% since then. The runaway success could make other AI companies on Wall Street consider following suit (even if the split isn't necessarily the only reason behind the stock's performance).
Remember, a stock split It doesn't change anything about the underlying business or fundamentals of the stock. It simply divides the shares into more shares with proportionately lower prices and financial statements per share. Companies split their shares for numerous reasons, including to make it easier to buy and sell shares for employees (who could get them as stock options instead of pay) and investors.
With Nvidia ending its stock split on June 10, the question that naturally arises is: Which AI companies could be next in a stock split? Three Fool.com contributors identified microsoft (MSFT 0.22%), Metaplatforms (GOAL 0.11%)and super microcomputer (SMCI -3.05%) as the AI โโStocks Most Likely to Split Next.
Here's why.
This venerable tech giant appears poised for a split
Will Healy (Microsoft): As a company that until very recently had the most valuable market capitalization in the world, Microsoft is not a surprising candidate for a stock split. Considering how much stock price appreciation it has seen in recent years, what's surprising about Microsoft stock is that it's been more than 21 years since Microsoft last split its shares.
Between the late 1980s and early 2000s, when Microsoft was the dominant PC operating system company, stock splits were much more common. During that period, the stock split nine times.
However, the crash of the dotcom market and then the rise of Apple Microsoft's leadership was eroded over time, particularly after it launched the iPhone in 2007. Between 2000 and 2014, when Steve Ballmer was CEO, Microsoft shares lost 37% of their value.
The company's status finally improved when Satya Nadella took over as CEO in 2014. He redefined Microsoft as a cloud company and, later, as a leader in artificial intelligence. During Nadella's 10-year tenure, Microsoft stock has risen more than 1,110%, taking it to $440 per share as of this writing.
Given that level of share price growth, the need for a split also grew. The company's growth suggests that share price appreciation is likely to continue. In the first three quarters of fiscal 2024 (ended March 31), net income increased 26% year over year. The company's outlook for the remainder of the fiscal year also points to double-digit percentage revenue growth.
Another factor pointing to a stock split involves Microsoft being a component of Dow Jones Industrial Average. Since the Dow is price weighted, Microsoft will probably need to split its shares so as not to have a huge effect on the movement of the index. This should ensure that the 21-year stock split drought finally comes to an end.
Meta Platforms has never issued a stock split, but the time may finally have come
Jake Lerch (Metaplatforms): All in all, 2024 has been a great year for "Magnificent Seven" actions. In fact, six of the seven (tesla being the only exception) have posted double-digit percentage gains so far this year. However, of these stocks, only one has never split its shares: Metaplatforms. The time has come for that first division. This is why.
First off, the stock is expensive. One Meta share is trading at around $504. -- placing the action out of reach of many retail investors. By implement a 3 for 1 or even 5 for 1 stock splitMeta could significantly lower its share price and make stock more accessible to retail investors that I may not be able to buy fractional sharespotentially reducing the price to a more reasonable range of $100 to $175.
TO recent study of Bank of America revealed another compelling reason for Meta to split its shares: outperformance. The study, which examined stock splits since 1980, found that shares that were divided Beat the S&P 500 during the 12 months following the separation. This was true in Each one of the last four decades (see table below).
Image source: Statesman
While many investors would probably applaud a Meta stock split, it is far from a given. Meta's management is not in favor of stock splits. In its 12 years as a public companyMeta has never done a stock split. This is in stark contrast to other tech mega-caps like Adobe and microsoftwhich split their shares four and seven times, respectively, in the first 12 years of their existence as public companies.
In any case, investors should keep a close eye on meta-platforms. Stock split or not, the company remains one of the best-performing tech stocks thanks to its lucrative digital advertising business. With its first-quarter revenue growing 27% year over year and its earnings rising 127%, long-term investors would do well to consider Meta as a buy-and-hold candidate.
Super Micro Computer could choose to reignite its rally with a stock split
justin dad (Super Microcomputer): For a time, Super Micro Computer was apparently the AI โโversion of Robin to Nvidia's Batman. But share prices have stagnated and declined after reaching a high of $1,229. Meanwhile, Nvidia continues to reach new highs. Here's why Super Micro Computer, or Supermicro as it's also known, could still get back on track, which would require a stock split.
The company sells modular server systems for data centers. This is great for companies that don't have the experience or time to build their own and just want to implement computing as quickly as possible. Like Nvidia, Supermicro has become a โpreferredโ option as AI spending increases. You can see below how revenue growth has accelerated by up to 200% year over year, and management has underlined this by noting that demand for its products is dramatically outpacing the broader industry.
SMCI Revenue (Quarterly YoY Growth) data for Y Charts
Evidence suggests Supermicro could benefit from data center tailwinds for some time. According to Newmark, AI will drive enough demand for data centers to double their energy consumption by 2030 from current levels. Supermicro has made almost $12 billion in revenue in the last 12 months; Analysts believe annual revenue could double to more than $23 billion by next June.
Meanwhile, the company has a healthy outlook for earnings growth. Analysts believe earnings per share will grow on average 52% annually over the next three to five years. In other words, the AI โโtailwinds remain intact and fundamental strength should eventually drive the stock higher. Today, the stock trades at a Direct P/E of 33, making it a bargain if Supermicro achieves such strong earnings growth. These catalysts could push Super Micro Computer higher, an exciting prospect for investors.
So why split the stock?
The company has never split its shares even though shares have appreciated more than 9,400% since its initial public offering. Now trading at over $800 per share, the stock is harder to buy and sell (less liquid). It is more difficult for investors to buy stocks slowly over time without having a lot of money. Employees who own profitable shares in the company must sell in chunks when the shares are trading at that price. Splitting the shares reduces the share price and alleviates these problems. Additionally, the positive attention that a stock split usually brings could help move the stock price again after the stock has stagnated in recent weeks. It's potentially a win-win for everyone.
Bank of America is an advertising partner of The Ascent, a Motley Fool Company. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch He has positions in Adobe, Nvidia and Tesla. justin dad has no position in any of the stocks mentioned. Will Healy has no position in any of the stocks mentioned. The Motley Fool positions and recommends Adobe, Apple, Bank of America, Meta Platforms, 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.
