The Tech World’s Double Whammy: AI Revolution and Stock Splits Converge
In a rare occurrence, two hot trends have captured Wall Street’s attention simultaneously. The artificial intelligence (AI) revolution and stock-split euphoria have joined forces to propel the stock market’s major indexes to record-closing highs in 2024. A stock split, a tool employed by publicly traded companies, adjusts share prices and outstanding share counts by the same factor, having no impact on market capitalization or operating performance.
Since the start of 2024, over a dozen notable companies have announced or completed stock splits, with all but one being forward splits aimed at making shares more affordable for everyday investors. The AI sector has been at the forefront, with leading AI companies dominating the stock-split landscape.
Nvidia and Broadcom, two AI giants, have made headlines in recent months. Nvidia’s historic 10-for-1 forward split, effective June 7, followed a remarkable $2 trillion increase in market capitalization over 17 months. The company’s dominance in the AI-graphics processing unit (GPU) market, particularly with its popular H100 GPU, has driven investor enthusiasm. Meanwhile, Broadcom’s 10-for-1 forward split, effective July 12, has fueled excitement about its AI networking solutions.
However, the most anticipated AI stock split of the fourth quarter is about to take center stage. Super Micro Computer, a customizable rack server and storage solutions company, will complete its first-ever 10-for-1 split since going public over 17 years ago. The company’s shares have skyrocketed 779% over the trailing two-year period, driven by demand for AI infrastructure.
While Super Micro’s reliance on Nvidia’s prized H100 GPUs has contributed to its success, it also poses risks, including potential supply chain disruptions due to overwhelming demand. Furthermore, the AI bubble may eventually burst, as history suggests, which could negatively impact Super Micro’s growth prospects. Additionally, allegations of accounting manipulation and a Justice Department probe have cast a shadow over the company.
As Super Micro Computer’s stock split finally arrives, investors will soon decide which side of the aisle they prefer. Before investing, it’s essential to consider the potential risks and rewards associated with this highly anticipated event.
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