The AI revolution has fueled the growth of technology enablers, most of which exist in the world Semiconductor sector.
In fact, the stock movements of these companies have been so strong that many of them are now trading at very high share prices, leaving these AI beneficiaries vulnerable to a potential stock split.
Stock splits do not create or destroy any value on their own. After all, if a company owns twice as many shares but half the stock price, the company's total market value stays the same. However, stock splits can help some people purchase shares if they do not have a broker that allows the purchase of fractional shares. Furthermore, splits can increase the liquidity of a stock, which can help lower bid-ask spreads for trading purposes, thus attracting more money into the stock.
So, although the following five stocks have already seen very strong rallies, a split could push these AI winners even higher.
1. Nvidia
The first and most obvious on the list is the AI GPU Commander Nvidia (Nasdaq: NVDA). Not only is Nvidia currently leading the entire AI revolution with its best-in-class AI chips and software ecosystem, but it also has a history of stock splits. While Nvidia has split its stock several times in the early 2000s, most recently a 4-for-1 split in July 2021.
Of course, with the stock having quintupled since that split just three years ago and its stock price at $944 as of this writing, it's not a stretch to think the company might choose to split its stock again.
Nvidia predicted the AI revolution long before its other peers, giving it a several-year lead. In fact, Nvidia has been investing in its CUDA software ecosystem since 2006. CUDA allows developers to program Nvidia graphics processors to process data, thus enabling artificial intelligence. Fast forward to the introduction of ChatGPT in late 2022, and this foresight seems like a stroke of genius. The 17-year head start of the competition has provided some impressive network effects, with AI developers building most of their applications using CUDA making it difficult for competitors to gain ground.
But Nvidia isn't resting on its laurels; Last October, management announced it would double the speed at which it delivers new chip architecture, from once every two years to once a year. In this regard, management presented the new Blackwell architecture in March, which will be on the market in late 2024. These new AI chips offer a significant leap forward even compared to the current Hopper architecture, offering up to 2.5 times and up to five times the training performance Perform heuristics on precedent.
Nvidia will release its first-quarter earnings report tomorrow, Wednesday, May 22, and all indicators point to continued strong AI-fueled hypergrowth.
2. Super micro computer
One AI stock that has delivered better returns than Nvidia over the past three years is Super micro computer (NASDAQ: SMCI). Granted, much of Super Micro's recent success is due to Nvidia's AI chips, but SMCI's stock market returns have actually been much better. Since July 2021, the last time Nvidia did a stock split, Nvidia shares have risen five times. But Super Micro shares have increased tremendously More than 25 times In less than three years. As a result, Super Micro's stock price has risen to about $900 per share as of this writing, setting it up for a potential split.
Much of this outperformance was a result of Super Micro starting from a much lower valuation. In the past, its server products were seen as a “commodity” with many other competitors in the space.
But the artificial intelligence revolution has revealed the truth Strengths of the business model CEO Charles Liang has been farming for 30 years. By designing its servers from “building blocks” or independently creating the smallest possible modules or server components, and then being able to build servers from any combination of these components, Super Micro has extensive customization capabilities that enable it to meet almost any customer modification request. Not only that, the architecture also saves costs, as parts of the server can be updated instead of having to replace the entire system.
In addition, Liang has focused on energy efficiency in the design of its servers for twenty years, long before this idea became popular. But with the massive electricity needs and costs of AI servers, efficient Super Micro designs are finding greater appeal today. With offices in the heart of Silicon Valley close to Nvidia and other chipmakers, Super Micro is often able to stay ahead of competitors with the latest in-demand features like liquid cooling, and is often first to market with servers containing the latest and greatest chips.
While Super Micro's P/E ratio has swelled from single digits to 50 over just the past few years, it's also showing growth to back it up, with an impressive 200% growth in the most recent quarter. As such, I expect Super Micro's stock price to at least maintain these valuation levels, with a possible stock split on the cards.
3. Broadcom
Another beneficiary of artificial intelligence is Broadcom (NASDAQ:AFGO)This is thanks to two main factors. First, Broadcom makes the world's leading networking and routing chipsets through its Tomahawk and Jericho brands, and data center networking needs are growing exponentially thanks to the data-intensive nature of AI.
Second, Broadcom has a proprietary on-chip (ASIC) IP design that third parties can use to create AI accelerators. In this area, Broadcom has caught some big fish with both the alphabet And Meta platforms Using the company's ASICs to design its own in-house AI accelerators.
As a result of its highly cash-generating business and AI-fueled growth, Broadcom has seen its stock price rise to more than $1,400 per share. This certainly puts it in the running for a stock split.
Of course, the boost in artificial intelligence is only the latest catalyst to drive Broadcom shares. Even before the AI revolution, Broadcom was an impressive winner thanks to CEO Hock Tan's wise acquisition strategy. Over the past 18 years during his tenure, Tan has pursued strong semiconductor franchises, then cut costs as these defensible niche technologies were integrated into the Broadcom umbrella.
Then in 2018, Tan expanded Broadcom's reach when it bought its first software company, California Technologies, diversifying the chip industry into software, albeit still within the core enterprise infrastructure market. After purchasing cybersecurity firm Symantec in 2019, Broadcom made its largest purchase to date in VMware, a leader in software that enables hybrid cloud and data center virtualization capabilities. VMware should also benefit from the growth of artificial intelligence as customers use multiple clouds with unique capabilities as they strive to keep their data secure in their own data centers. As a result of the VMware acquisition, which closed late last year, Broadcom's software mix grew to approximately 40% of revenue.
Now, Broadcom is not just a chip maker, but a diversified technology platform company with many ways to win. Look for its profitable growth to remain strong in the coming years.
4. ASML Holdings
The path goes toward manufacturing all advanced semiconductors, including Nvidia graphics processing units ASML Holdings (NASDAQ: ASML). This is because the Netherlands-based lithography company has a monopoly on the extreme ultraviolet (EUV) lithography technology needed to make today's most advanced chips.
UV technology has taken around 20 years to develop with significant buy-in from ASML customers to fund pioneering research, so don't think UV's capabilities can be imitated any time soon. The resulting technology allows chip makers to create extremely precise transistor designs at light wavelengths that do not occur naturally on Earth. And ASML's latest version of EUV, called “high-NA” EUV, can print designs only up to 8 nanometers wide. ASML is set to collect dough from the High-NA, which was just introduced late last year, with the price of these machines currently ranging between US$300 million and US$400 million!
UV light only began to be used commercially in 2018, with the first UV-enabled products appearing in 2019. So, we are only at the beginning of the UV era. As such, ASML has seen its stock rise 367% over the past five years, to $940 per share, making it a candidate for a stock split.
5. LAM Research
Such as ASML, L Research (NASDAQ: LRCX) It is a leading semiconductor equipment company that has also seen shares rise in the bullish semiconductor market. But while ASML is the de facto leader in lithography, which traces designs onto a silicon wafer using extremely soft light, Lam's technology does the precise, painstaking work of etching the printed design and then depositing semiconductor materials in very complex patterns to build the chip.
While LAM clearly does not have a monopoly on etching and deposition technology like ASML does with UV, LAM does in fact have a monopoly on certain process steps in the chipmaking process. More specifically, Lam dominates the deposition technique crucial to “stacking” chip components in a vertical manner. Over the past decade or so, this has led to Lam capitalizing on the production of 3D NAND flash chips, where memory makers stack storage in a “3D” fashion in increasing numbers of layers with each generation.
Now, logic chips and DRAM important for AI are also “going vertical,” including high-bandwidth DRAM that is currently seeing such strong demand from AI applications. In fact, in a January conference call with analysts, Lam's management indicated that it had a 100% market share in some of the technologies needed to stack DRAM modules. With universal gate transistors and 3D designs making their way into logic chips, look for Lam to further enhance AI in the coming years.
That's why shares are up 385% over the past five years to $941 per share as of this writing, making this powerful compound ripe for a potential stock split as well.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Billy Duberstein He has positions in ASML, Alphabet, Broadcom, Lam Research, Meta Platforms, and Super Micro Computer and has the following options: short January 2025 $1,840 calls on Super Micro Computer, short January 2025 $110 calls on Super Micro Computer, and short January 2025 calls $125 calls on Super Micro Computer, short January 2025 $130 calls on Super Micro Computer, short January 2025 $280 calls on Super Micro Computer, and short January 2025 $85 calls on Super Micro Computer. Its clients may own shares in the mentioned companies. The Motley Fool has positions in and recommends ASML, Alphabet, Lam Research, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has Disclosure policy.
Stock Split Watch: 5 Artificial Intelligence (AI) Stocks That Look Ready for a Split Originally published by The Motley Fool