Stock splits have taken the market by storm, with a wide range of companies announcing these operations to lower high-flying stock prices. This is generally good news, showing that these players and the market have done well. And the operations themselves are positive because they make it easier for a wider range of investors to buy the stocks in question.
The tech world has become central to this movement, with giants in the field of artificial intelligence (AI). Nvidia And Broadcom recently announced 10-to-1 stock splits. Nvidia completed operations on June 7 and Broadcom will complete the split next month. This is because shares of both companies rose well above $1,000, a price that – even if the valuation seems reasonable – could be a psychological barrier for some investors.
Now, investors are looking ahead and wondering which other top-performing tech stocks will join the stock split. My prediction is that an equipment manufacturer, one that has seen sales increase thanks to demand for AI, may be the next to launch a split. And the announcement could even come during that company’s upcoming earnings report. Let’s take a look at this potential stock split winner.
A stock that trades for more than $800
The company I’m talking about is Supermicrocomputer (NASDAQ:SMCI), a maker of servers, workstations, full-rack scale solutions, and other equipment needed in AI data centers. Super Micro shares are up more than 4,000% in the past five years, reaching over $800 today. They even surpassed $1,000 earlier this year, but have since fallen from those record levels.
We can’t look to Super Micro’s past actions for clues as to whether it might split its shares, as the company’s situation several years ago is very different from its situation today. The equipment maker has never launched a stock split, but a split wasn’t necessary for most of Super Micro’s 30-year history, as its stock traded for less than $20 per share for much of that time.
Over the years, Super Micro’s revenue grew steadily, but it didn’t really take off until the AI ​​boom gained momentum. Demand for Super Micro’s products soared, resulting in the company reporting its first quarter of $3 billion this year – which was the revenue it generated in a full year in 2021.
Today, it’s logical to imagine Super Micro’s stock continuing its gains and even returning to $1,000 and higher as this AI growth story continues. The company said in recent earnings reports that demand for its full rack-scale systems, including top chips from Nvidia and other market giants, has remained at record levels.
A $1 trillion AI market
And this movement is likely not over yet – for a few reasons.
First, the actual AI market is still in the early days of its growth story, with analysts predicting an increase from $200 billion today to over $1 trillion by the end of the decade. Second, Super Micro works closely with Nvidia and other chip leaders to immediately integrate their latest innovations into its products. And because Super Micro’s products have many common components, building and customization can be done quickly – something customers appreciate.
Finally, Super Micro offers products equipped with liquid cooling technology, an extremely important feature for AI data centers due to the heat created by AI processes. Super Micro CEO Charles Liang said at the recent Computex event that he expects 15% of the company’s rack shipments to include liquid cooling this year, and that number should rise to 30% next year, according to The register.
So sales at Super Micro have soared and the future looks bright, giving the shares reason to move higher. And this means now is the perfect time for the company to announce a stock split, a move that will allow investors with smaller budgets to invest without having to rely on fractional shares. Nvidia and Broadcom both said in announcing their splits that their motive was to make it easier for employees and others to buy their shares.
And if Super Micro announces a split, the move also shows that management is confident in the company’s future – and in the potential for its share price to take off again from the new lower level.
Should you buy Super Micro or wait?
Considering all this, should you as an investor buy Super Micro now, or wait to see if my prediction is correct and the company announces a split?
While a potential split is positive, it is not a catalyst for share price movements and does not change anything fundamental. The company’s market value and valuation remain the same – so if you wait for a possible stock split, the price per share would be lower, but you wouldn’t necessarily get a bargain. As we see in the case of Nvidia, its shares are more expensive today than before the recent stock split.
So this means that if you want to capitalize on the Super Micro story, there’s no reason to wait for a possible stock split to buy. Now is a great time to get in on this AI growth stock and hold it for the long term.
Should You Invest $1,000 in Super Micro Computer Now?
Consider the following before buying shares in Super Micro Computer:
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Prediction: After Nvidia and Broadcom Split, This Artificial Intelligence Stock Will Be Next Originally published by The Motley Fool
