The rise of artificial intelligence (AI) promises to create fortune-building opportunities for forward-thinking investors. Major providers of AI infrastructure and applications may be particularly attractive investments as they are likely to benefit disproportionately from the growth of the technology industry.
AI leaders who implement forward stock splits could get an extra boost. Splits may not change a company’s fundamental value, but investors view them as a vote of confidence from management about the company’s prospects. Stocks that split usually perform well and often reach new highs.
If you’re looking for top quality AI stocks that could opt to split their shares in the near future, read on.
Potential Stock Split No. 1: Super Micro Computer
Nvidia‘S (NASDAQ: NVDA) State-of-the-art semiconductor technology has helped usher in the AI explosion. In turn, the chipmaker’s stock price has soared. Super microcomputer (NASDAQ:SMCI) provides powerful servers and data storage systems that go hand-in-hand with Nvidia’s hugely popular AI chips – and its shares have actually outperformed the tech giant’s so far this year.
The company – known as Supermicro – grew at a blistering pace in its most recent quarter. Revenue for the period ended March 31 rose 201% year over year to $3.9 billion. Earnings per share rose an even more impressive 329% to $6.56.
Supermicro’s close ties with Nvidia and rapid pace of innovation enable the AI hardware manufacturer to outpace its competitors. Supermicro was quick to market with its liquid-cooled AI SuperClusters for Nvidia’s new Blackwell AI computing platform. The easily scalable data center systems help accelerate AI model training and inference while reducing energy costs.
“Supermicro has engineered groundbreaking Nvidia-accelerated computing and networking solutions, enabling the world’s trillion-dollar data centers to be optimized for the age of AI,” Nvidia CEO Jensen Huang said in a press release announcing Supermicro’s new SuperClusters on June 4 announced.
Given Supermicro’s recent business performance and tantalizing growth potential, you’d think Supermicro’s shares would be trading near all-time highs. Yet that is not the case today. The previously high-flying share price has fallen back of late and is now about 37% off its 52-week high.
Therein lies your opportunity. Supermicro’s stock now trades for less than 23 times expected 2025 earnings. That’s an attractive price for an AI star expected to grow earnings 62% annually over the next five years.
Furthermore, Supermicro, with a stock price near $800, could soon decide to split its shares to make them more affordable to ordinary investors. This could help spark a rally in the stock price, sending it higher again.
Potential Stock Split No. 2: Palo Alto Networks
In addition to high-quality hardware, cybersecurity is an essential part of any effective AI strategy. Palo Alto Networks (NASDAQ: PANW) is a leading provider of critical cloud security services, and AI will fuel its growth.
AI requires data. Protecting that data is of the utmost importance. Failure to do so could result in loss of customer trust, huge fines from regulators and other costly financial penalties.
According to Grand View Research, global demand for cybersecurity solutions will reach $500 billion by the end of the decade. Consulting giant McKinsey, meanwhile, expects the market for products and services that protect the digital economy to eventually grow to as much as $2. trillion.
Palo Alto Networks is a top dog in this booming industry. It offers a wide range of tools, such as next-generation firewalls and advanced threat prevention services, delivered through a single consolidated platform. This unified approach helps reduce complexity and accelerate customer incident response times.
Scale is another powerful competitive advantage. With more than 80,000 business customers, the cyberguard has more data to analyze. This helps machine learning technology to continually become smarter. And as soon as the AI-powered platform detects a new threat, it immediately updates its defenses.
Palo Alto clearly has a promising long-term future. It could also get a near-term boost from a possible stock split. Like Supermicro, its shares trade at a relatively high price of around $300. The company opted to split its shares in 2022 to make them more accessible to potential shareholders. If this is done again today, demand for its shares among individual investors could increase, which could help put the stock price on a path to new highs.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia and Palo Alto Networks. The Motley Fool has a disclosure policy.
Stock Split Watch: 2 Artificial Intelligence (AI) Stocks to Buy Now that Are Ready to Split was originally published by The Motley Fool
