One of the most notable trends for investors this year is the resurgence in the popularity of stock splits. The ongoing bull market is driving stock prices higher, as evidenced by stock split announcements Chipotle And Walmart.
However, the rapid adoption of artificial intelligence (AI) is also driving up stock prices, thanks to rising sales and profits. The standard bearer of this trend is Nvidiawhich announced a 10-for-1 stock split after its share price rose 728% since the start of last year (as of market close on Thursday), coinciding with the advent of generative AI.
The speed at which AI has emerged has boosted the fortunes of a number of companies, and the resulting increases in stock prices make them prime candidates for stock splits. bank of America Analyst Jared Woodard noted that many companies consider a stock split when their stock price rises above $500.
A look at some of the best-performing stocks since the start of 2023 suggests there could be more stock splits in the coming year.
Super Micro Computer: Current price around $778
Super microcomputer (NASDAQ:SMCI), also known as Supermicro, is best known for integrating cutting-edge chips into its state-of-the-art servers, designed to withstand the rigors of AI training and inference. The company offers a variety of free-air, liquid-cooled, and traditional air-cooled servers, with plenty of options for companies operating across the AI spectrum.
Close partnerships with the major AI chip makers help Supermicro maintain a steady supply of the most in-demand AI chips to power its servers, and demand has been off the charts. In the third quarter of fiscal 2024, Supermicro generated revenue that grew 201% year over year to $3.85 billion, while adjusted earnings per share (EPS) rose 308% to $6.65.
The company is trying to expand its facilities to meet this increasing demand. Management believes it can increase production to $25 billion per year in the coming years.
During its 31-year history, Supermicro has never split its stock, but until recently it had never experienced such a growth spurt. Since the beginning of last year, the stock has risen by more than 848%, but the results are even clearer when you take a step back.
Over the past ten years, Supermicro’s sales have increased by 799%, while net profit has increased by more than 2,330%. These results have led to the stock price increasing by 2,980%. Despite its blistering performance, Supermicro shares are surprisingly cheap, selling for just 2x forward sales.
If growth continues on its current trajectory – and there is every indication that it will – Supermicro stock will remain out of reach of all but the most affluent investors, except those with access to fractional shares. That gives the company an incentive to make its shares more accessible to ordinary investors, which would result in a stock split.
Microsoft: Current price around $425
Microsoft (NASDAQ: MSFT) is no wallflower, thanks to its ubiquitous Windows PC operating system and Office suite of workplace productivity tools. More recently, however, the company gained an edge over the competition for its early moves into generative AI.
Microsoft’s stake in OpenAI gave the company unfettered access to the early stages of this groundbreaking technology. This in turn resulted in Copilot, the company’s line of AI-powered digital assistants.
These tools are deeply integrated into a broad cross-section of Microsoft’s products and services, and demand for AI has fueled the growth of the company’s cloud infrastructure service. Azure Cloud revenue grew 31% year over year in the first quarter, surpassing both Amazon Web Services (AWS) and Alphabet‘s Google Cloud, which grew 17% and 28% respectively, according to research firm Canalys.
For the third quarter of 2024 (ended March 31), Microsoft’s revenue growth accelerated to 17% year-over-year, while earnings per share rose 20%. During the earnings call, the company noted that AI services contributed seven points of cloud growth. This shows that AI is having a halo effect on Azure Cloud, increasing adoption.
Microsoft’s track record for growth is undeniable, but recent results have made it the most valuable company in the world, with a market capitalization of more than $3.1 trillion and a 77% share price increase since inception last year. The results are even more compelling when viewed over the long term.
Over the past ten years, sales have grown by 165%, resulting in a 376% increase in net income. As a result, Microsoft’s stock price has increased by almost 918%, with a current price of $425. The stock is a bit pricey at 36 times forward earnings, but given its track record and the huge opportunities ahead, it’s worth a premium.
The company hasn’t split its shares since 2003, but that was a lifetime ago. Microsoft is currently just trading at a new all-time high, and we’re only seeing the tip of the iceberg when it comes to the company’s AI capabilities.
With all that as a backdrop, we could finally see another Microsoft stock split this year.
Metaplatforms: Current price around $494
After weathering a trough in digital ad spending during the recession, Metaplatforms (NASDAQ: META) the stock has come roaring back. The seeds planted during the company’s cost-cutting campaign are paying off and the advertising market is recovering. Meta has a long history of using AI in its daily operations, but the rise of generative AI has taken that to the next level.
Previous versions of AI helped Meta choose more relevant content for users on its social media platforms, match ads with the right viewer, and tag photos, among other things. This experience helped the company quickly deploy AI on a larger scale when generative AI came along.
Meta developed its Llama (Large Language Model Meta AI), now in its third edition. Llama is among the leading AI systems and is available on all major cloud infrastructure services, which pay Meta for the privilege of offering it on their platforms. This is the first of what is expected to be several new ways in which Meta will generate revenue from AI.
In the first quarter, Meta’s revenue of $36.4 billion rose 27% year over year, while earnings per share of $4.71 rose 114%. This could be just the beginning as the recovery in digital marketing gains momentum. With ad spend gaining momentum, Meta should continue to benefit.
The company is also working to make advertisers on its platform more successful. Its flagship offering is Meta Advantage+, a suite of AI-powered tools that has become “one of the fastest-growing advertising products” in the company’s history.
A test run generated a 35% increase in incremental return on ad spend and a 58% increase decrease in increasing costs per purchase. Advertisers not only achieve better results, but also do so more cost-effectively. These automated tools help simplify the creation of ad campaigns and make them more lucrative, attracting and retaining more advertisers.
Since the start of last year, shares of Meta Platforms are up 310%, but that’s not unusual. The past 10 years have been a lucrative period for Meta and its investors. Turnover increased by 1,150%, while net profit increased by 1,460%.
This has fueled Meta’s robust stock price gains of 681%. With a share price of around $494, Meta is less than 6% lower than the recent new all-time high in April. Furthermore, the stock is currently selling for just 25 times forward earnings, an attractive price given Meta’s history.
Given the company’s track record of consistent performance, multiple growth engines, and the opportunities AI presents, this could be the year Meta finally embraces a stock split.
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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. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Danny Vena holds positions in Alphabet, Amazon, Chipotle Mexican Grill, Meta Platforms, Microsoft, Nvidia and Super Micro Computer. The Motley Fool holds positions in and recommends Alphabet, Amazon, Bank of America, Chipotle Mexican Grill, Meta Platforms, Microsoft, Nvidia and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Beyond Nvidia: 3 proven artificial intelligence (AI) stocks that could split their stock in 2024 was originally published by The Motley Fool
