The stock market has been on fire lately, with record-breaking highs being set by major indexes such as the S&P 500 and the Dow Jones Industrial Average. One index, in particular, is riding the wave of artificial intelligence (AI) optimism to new heights – the Nasdaq Composite, the most tech-heavy of the major indexes, has seen a 33% increase over the last 12 months.
With the market reaching new highs, some stock prices have reached towering heights, prompting discussions about stock splits. A stock split is when a company divides its existing shares into multiple shares, effectively lowering the price of each share. This is often done to make the stock more accessible to individual investors and increase liquidity.
Three stocks that are being closely watched for potential stock splits are Super Micro Computer (NASDAQ: SMCI), Nvidia (NASDAQ: NVDA), and Meta Platforms (NASDAQ: META). These stocks have experienced significant growth and have seen their share prices reach new highs.
Super Micro Computer has had an incredible run, with its shares generating a total return of 774% in the last 12 months. Its stock price has skyrocketed from around $86 per share to over $880. Given its rapid rise, many investors believe it is prime for a stock split. Super Micro Computer has never conducted a stock split in its 17 years as a public company, but with its stock price closing in on $900 per share, it may be time.
Nvidia, a leading AI chipmaker, has seen its stock price rise nearly 240% over the last year as demand for AI chips has boomed. With a market share estimated at 85% in the high-end AI chip market and a projected compound annual growth rate of 38% for the AI chip market, Nvidia’s growth prospects make it a strong candidate for a stock split. Additionally, a lower nominal share price would make it a leading contender for inclusion in the Dow Jones Industrial Index, further boosting investor interest.
Meta Platforms, formerly known as Facebook, has experienced an epic comeback in its stock price. After bottoming out at $89 per share in late 2022, its stock is now rapidly approaching $500. The company’s social media apps, including Facebook, Instagram, and WhatsApp, have continued to grow, and Meta has been investing in building computing systems for its long-term AI ambitions. With its attractive forward P/E ratio and strong earnings growth expectations, a stock split for Meta could be a favorable move for long-term investors.
It is important to note that stock splits do not change a company’s fundamental valuation. They are primarily cosmetic changes that can make a stock more accessible and appealing to individual investors. However, stock splits can generate excitement and increase liquidity, which often leads to further price appreciation.
Overall, as these AI stocks continue to soar, investors and analysts are closely watching for potential stock splits. If these companies do decide to split their shares, it could be a positive development for both current and prospective investors.
