Companies that split their stocks typically experience phenomenal growth, causing their stock price to skyrocket. It is not uncommon for a fast-growing company to do multiple stock splits over several years. For example, leading chip supplier Nvidia (NASDAQ: NVDA) has split its shares six times in the past 25 years, including twice since 2021.
The most common type of split is a forward stock split where the goal of the company is to make the stock price more affordable for investors. Keep in mind that a stock split gives you more shares, but it also reduces the share price so the value of your investment remains the same after the split.
Stock splits alone aren’t a good reason to invest in a company. It still comes down to looking at a company’s growth and future prospects. If the stock is trading at a reasonable price relative to that growth, you’ve got a winner on your hands. Here are two growth stocks that recently issued 10-for-1 splits that you can buy today for under $200.
1. Nvidia
Nvidia is one of the best-performing stocks of the past 10 years, with shares up 24,000% since 2014. The company has split its stock twice in the past five years: a 4-for-1 split in 2021, followed by a 10-for-1 split in June of this year, bringing the stock price to a more affordable $118.
The stock has been volatile over the past month as investors focus on short-term obstacles to growth. Nvidia is launching its Blackwell GPU architecture later than Wall Street expected. Nvidia is also dealing with export restrictions and increased competition in China, though its China business grew sequentially last quarter.
Some of Nvidia’s largest customers in the US make their own chips for artificial intelligence (AI) workloads, including Amazon Web Services (AWS). There is a growing demand for alternatives as Nvidia graphics processing units (GPUs) are in short supply and command high retail prices.
Despite these risks, Nvidia’s revenue grew 122% year over year in the second fiscal quarter. There is currently no substitute for the general-purpose computing power of Nvidia’s GPUs. As a result, Amazon and other cloud service providers are expected to adopt Blackwell next year, which can run large language models (LLMs) significantly faster and cheaper than previous-generation chips.
Nvidia expects fiscal Q3 revenue to be about 79% higher than the year-ago quarter. Management sees the enterprise AI wave gaining momentum across industries, and that should lead to strong demand for Blackwell starting in fiscal Q4.
Analysts currently expect Nvidia’s earnings to rise 40% next year to $3.99. Assuming Nvidia shares trade at the same price-to-earnings (P/E) ratio, the stock could hit $200 by the end of 2025, representing a 69% increase.
2.Broadcom
Broadcom (NASDAQ: AVGO) is another chip stock that has delivered exceptional returns for investors in recent years. This leading provider of networking and software solutions for data centers issued a 10-for-1 forward split on July 15, sending its stock price down to $167.
Broadcom is well-positioned for long-term growth in the AI market. It began investing in AI about a decade ago, and it’s paying off. In Q2, revenue from custom AI accelerators grew more than three times compared to the same quarter a year ago.
Another catalyst that should benefit the stock is Broadcom’s smartphone business. It is a major supplier of components for AppleAs part of Apple’s commitment to invest $430 billion in the U.S. economy over the next five years, the company entered into a long-term deal with Broadcom in 2023 to provide wireless connectivity and other components for Apple devices.
Broadcom could see modest growth from Apple’s iPhone 16 in the coming year. Apple is expected to experience strong demand for its new iPhones as customers with older phones upgrade to take advantage of new AI features coming to iOS. Broadcom expects 20% sequential growth in wireless revenue in Q4.
Analysts are very positive on Broadcom at the moment, as some risks to the company have already materialized, such as the recent sluggishness in smartphone sales. Furthermore, the company has a lot of exposure to the growth in AI infrastructure, which bodes well for its long-term prospects.
The stock is trading at a forward P/E of 27 based on next year’s earnings estimate, and analysts expect the company to post 19% annual earnings growth over the long term. The stock should deliver excellent returns over the next few years.
Should You Invest $1,000 in Nvidia Now?
Before you buy Nvidia stock, here are some things to consider:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
2 Stock Split Stocks You Should Buy Before 2025 was originally published by The Motley Fool
