Some of the hottest artificial intelligence (AI) companies in the market, including Nvidia, BroadcomAnd Supermicrocomputer — have all split their stocks or announced plans to do so in the past year. These events haven’t actually made their high-flying stocks cheaper, since they’ve simply split their existing holdings into smaller chunks, but they’ve still attracted a lot of attention from retail investors looking to buy whole lots (100 shares) of a stock instead of just a few. They’ve also made it easier to trade options, since a single contract is tied to a single lot, and for companies to pay their workers with more flexible stock-based compensation plans.
So for long-term investors, stock splits aren’t that important, because they don’t change the company’s business model or valuations. But forward stock splits are still usually a sign of a well-run company — because the stock price has risen so much that it needs to be trimmed. ASML (NASDAQ: ASML) And Meta platforms (NASDAQ: META) are two AI-driven companies that fit that description and may be ripe for a split.
ASML
ASML is the world’s largest producer of lithography systems for optically etching circuit patterns on silicon wafers. It is also the only producer of high-end extreme ultraviolet (EUV) systems for producing the world’s smallest and densest chips. Shares in the Dutch company have nearly quadrupled in the past five years as top chip foundries — including Taiwanese semiconductor productionSamsung and Intel — rushed to stay in the “process race” to produce more advanced chips.
ASML’s stock now trades for around $840, but it’s been years since its last stock split. In fact, the company did three forward stock splits during the dotcom bubble and a reverse stock split in 2007. Another forward stock split, however, could bring some new attention to ASML — which is often overshadowed by better-known stocks like Nvidia.
From 2020 to 2023, ASML’s revenue grew at a compound annual growth rate (CAGR) of 25%. From 2023 to 2026, analysts expect revenue and earnings per share (EPS) to rise 13% and 21%, respectively, as the company grapples with tighter restrictions on exports to China. However, the expansion of the AI ​​market could offset much of that pressure.
ASML shares are not expensive, trading at 25 times next year’s earnings. What’s more, the company’s monopolization of a key chip technology makes it one of the easiest ways to profit from the long-term growth of the semiconductor and AI markets.
Meta platforms
Meta Platforms, the parent company of Facebook, Instagram, Messenger and WhatsApp, is using AI to analyze user data and create targeted ads. It is also developing its own AI accelerator chips to gradually reduce its reliance on Nvidia’s chips. It served 3.27 billion daily active people across its four main apps in the most recent quarter.
Meta has faced some tough macro, competitive and platform related challenges (especially from Apple‘s iOS update in 2021), but revenue still grew at a CAGR of 16% from 2020 to 2023. It recovered by attracting Chinese advertisers, expanding Reels to take on TikTok and bolstering its first-party data collection tools to counter Apple’s privacy-focused changes.
Analysts expect Meta’s revenue and earnings per share to grow at a CAGR of 15% and 23%, respectively, from 2023 to 2026, even as it expands its money-losing Reality Labs segment to produce more augmented reality (AR) and virtual reality (VR) products. Those are robust growth numbers for a stock that trades at 22 times this year’s earnings.
Meta’s stock is trading in the low $480s, but it’s the only “Magnificent Seven” stock that has never split its shares. A stock split could generate some fresh buzz for this social media giant that still looks undervalued relative to its growth.
Should You Invest $1,000 in ASML Now?
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Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Leo Sun has positions in ASML, Apple and Meta Platforms. The Motley Fool has positions in and recommends ASML, Apple, Meta Platforms, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: long Jan 2025 $45 calls on Intel and short Aug 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Stock Split Watch: 2 AI Stocks That Look Poised to Split was originally published by The Motley Fool
