The AI Revolution Fuels Market Growth and Stock Splits
For nearly two years, the investing community has been captivated by the rapid rise of artificial intelligence (AI). The promise of AI-driven software and systems learning and evolving over time has led to staggering growth opportunities. However, it’s not just AI that’s driving the market upward. Stock splits have also played a significant role in the recent surge.
A stock split allows publicly traded companies to adjust their share price and outstanding share count without impacting their market capitalization or operating performance. Since the start of the year, over a dozen prominent businesses have announced or completed stock splits, with four being high-flying AI stocks.
Nvidia and Broadcom have been at the forefront of the AI revolution and stock-split euphoria. Nvidia completed its largest-ever forward split, 10-for-1, in June, while Broadcom enacted its first-ever split, also 10-for-1, in July. Both companies have valid reasons for being in the spotlight. Nvidia’s graphics processing units (GPUs) have become the top choice for enterprise data centers, with the company dominating the market. Broadcom’s products, such as the Jericho3-AI fabric, play a crucial role in AI networking, connecting large quantities of GPUs to reduce latency and maximize computing ability.
However, it’s not just Nvidia and Broadcom making waves in the AI stock-split arena. Super Micro Computer, a customizable rack server and storage solutions specialist, completed a 10-for-1 forward split earlier this week. Although the company’s stock has faced pressure due to a short-seller report and potential accounting probes, it remains a significant player in the AI space.
Another notable AI stock split is Lam Research, a semiconductor wafer fabrication equipment provider. The company completed a 10-for-1 forward split, its first since 2000, and will begin trading at a split-adjusted price today. Lam’s equipment is used in AI and non-AI solutions, but it’s gaining attention for its role in packaging high-bandwidth memory (HBM), a crucial component in high-compute data centers.
As demand for AI-GPUs increases, so should the need for HBM and Lam’s equipment. The company’s management team is backing up its aggressive growth forecasts with a plan to return between 75% and 100% of free cash flow to stockholders in the form of share repurchases and/or dividends. However, investors should be mindful of Lam’s reliance on revenue from China, which could be impacted by U.S. regulators.
Today marks a new chapter for Lam Research as it begins trading at a split-adjusted price for the first time in almost a quarter of a century. With its growth potential and commitment to returning value to shareholders, Lam Research is an AI stock split worth watching.
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