Stocks that split tend to beat the price S&P500 (SNPINDEX: ^GSPC)as research shows bank of America. Since 1980, the average company has seen its stock price rise 25.4% during the twelve months following a stock split announcement, while the S&P 500 has seen an average increase of 11.9% over the same period.
Nvidia is the latest company to follow that pattern. Since announcing a 10-for-1 stock split on May 22, the stock has risen 43%, while the S&P 500 has returned just 3%. Nvidia’s success is due to its market leadership in artificial intelligence (AI) chips and its growing influence in other areas of the AI economy.
Super microcomputer (NASDAQ:SMCI) And Microsoft (NASDAQ: MSFT) also play an important role in the AI economy, and they could be the next companies to announce stock splits. Here’s what investors need to know.
1. Super microcomputer
Super Micro Computer designs and manufactures high-performance computing platforms for enterprise and cloud data centers. The products include individual servers and full-rack solutions built specifically for AI applications. Supermicro has a close relationship with Nvidia, but also buys chips, memory and other hardware from suppliers such as Advanced micro devices, BroadcomAnd Intel.
Dell Technologies is the market leader in sales, but Supermicro is an early leader in the AI servers subcategory due to its unique building block approach to product development. In concrete terms, the company can quickly integrate the latest chips and hardware into pre-assembled server building blocks, and carries out most developments in-house. The result is that Supermicro can typically bring new technologies to market faster than its rivals.
Supermicro also offers customers more flexibility in creating custom computing platforms. Its building blocks can be assembled in countless combinations, providing one of the broadest and deepest portfolios of advanced server and storage solutions in the IT industry. CEO Charles Liang says Supermicro offers the “best and broadest application-optimized GPU solutions on the market.”
Collectively, these advantages – the ability to quickly launch new products and meet a wide range of customer requests – should keep Supermicro at the forefront of the AI server market. Bank of America analysts estimate market share at 17% in 2026, up from 10% in 2023. Even more optimistically, KeyBank analysts expect Supermicro to account for 23% of AI server sales by 2025.
Looking ahead, Wall Street expects the company to grow earnings per share 48% annually through fiscal 2026, which ends June 30, 2026. That estimate makes the current valuation of 51.6 times earnings seem reasonable , despite the fact that it is a significant premium compared to the three-year period. on average 21.9 times earnings. I would feel comfortable buying a small position in this AI stock today, regardless of whether the company splits its stock in the near future or not.
2.Microsoft
Microsoft is the largest enterprise software company in the world. Last year it accounted for 18% of software sales and by 2025 its market share could reach 20%, according to Morgan Stanley. Microsoft’s flagship office productivity solution, Microsoft 365, is the foundation of that success. But the company is also the market leader in enterprise resource planning software with its Dynamics suite.
Microsoft is leaning on these benefits to monetize generative AI. It has added conversational assistants that complement its business software. For example, Copilot for Microsoft 365 automates tasks in Word, Excel, and other productivity applications. Similarly, Copilot for Dynamics 365 automates tasks in sales, service and financial applications. Nearly 60% of Fortune 500 companies use a Copilot product.
Microsoft’s IT prowess extends beyond enterprise software. The Azure subsidiary accounted for 25% of cloud infrastructure and platform services spending in the first quarter, and came in second Amazon Web Services (AWS). But Azure has gained two points of market share over the past year, while AWS lost one percentage point of market share.
Morgan Stanley analyst Keith Weiss discussed these stock gains in a recent note to clients. “The company’s leadership in the shift to public cloud is now strengthened by an early leadership position in generative AI.” One reason for that momentum is the partnership with OpenAI, a startup best known for ChatGPT. Azure OpenAI Service allows Microsoft customers to build generative AI applications with large OpenAI language models.
Looking ahead, Wall Street expects Microsoft to grow earnings per share 14.7% annually through fiscal 2027, which ends June 30, 2027. That consensus estimate pushes the current valuation of 38.7 times earnings seems expensive. Personally, I think Microsoft stock has gotten a bit ahead of itself amid the AI-induced euphoria currently seeping through the market. I would wait for a cheaper valuation before buying this potential stock split.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions at Amazon and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Bank of America, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls to Intel, long January 2026 $395 calls to Microsoft, short August 2024 $35 calls to Intel, and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Nvidia completed its 10-for-1 stock split. These two artificial intelligence (AI) stocks could be the next stock split originally published by The Motley Fool
