Investors went wild Nvidia‘S (NASDAQ: NVDA) stock split.
Shares of the artificial intelligence (AI) chip leader rose 27% from the stock split announcement on May 22 to the split’s execution on June 7.
The profits were enough to push Nvidia past the $3 trillion market cap mark and within a hair of becoming the most valuable company in the world. (It’s an exciting three-way race with Apple And Microsoft.) While a strong first-quarter earnings report from Nvidia also boosted the stock, the stock split appeared to be the main reason for the 27% gain. Shares continued to rise after the earnings report, even rising another 9% in the week after the split took effect.
Now, fellow chip stocks Broadcom (NASDAQ:AVGO) it’s your turn. Following Nvidia’s 10-for-1 stock split, Broadcom announced a similar 10-for-1 split when it reported fiscal second-quarter results on June 12 after business hours. Broadcom’s stock split will take effect on July 15.
Investors seem to appreciate the move. Shares of Broadcom, which is perhaps best known for its networking chips, have already risen 16% in the two days since the announcement.
Broadcom was due for a stock split
Broadcom’s shares are now trading above $1,700, higher than Nvidia was before its stock split. This is one of the highest share prices on the market.
In the announcement, management said the stock split was intended to “make ownership of Broadcom stock more accessible to investors and employees.”
Since being acquired by Avago (which adopted the Broadcom name) in 2016, the company has not split its shares, although the old Broadcom split its shares three times between 1999 and 2006.
While the increase in stock price is one reason for the stock split, Broadcom’s growth potential in the generative AI era provides another reason for the split.
Broadcom acquired virtualization software specialist VMWare late last year, and VMware was the main driver of its growth. Revenue rose 43% to $12.5 billion in the second quarter, ahead of the $12 billion estimate, but excluding VMware, revenue rose 12%.
Management also said that revenue from AI products was $3.1 billion, representing about a quarter of total revenue. Management said demand from cloud infrastructure companies for both networking and custom accelerators is strong. It now expects network revenues to grow 40%, up from its previous forecast of 35%, due to demand for AI. It also raised its full-year revenue guidance to $51 billion from $50 billion, of which $11 billion would be AI revenue.
Is Broadcom a Buy?
With or without the stock split, Broadcom seems like a smart long-term stock to own. The company has a long history of successfully integrating acquisitions and cutting costs, and it looks like it’s ready to do that again with VMware.
Meanwhile, the company may not have as much exposure to AI as Nvidia, but its competitiveness in areas like networking and custom ASIC chips is becoming apparent. For example, seven of the eight largest AI clusters currently in use use Broadcom Ethernet solutions.
Broadcom shares have soared in recent months, so some of the growth in AI is baked into the price. But the financial results were also boosted by the acquisition of VMware, which will give a significant boost to profits.
Buying Broadcom based on the stock split alone isn’t a good idea, but the split could help the stock rise in the coming months. As enthusiasm for AI stocks continues to percolate, Broadcom is earning gains in the broader sector as it clearly benefits from rising demand for generative AI.
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Jeremy Bowman has positions at Broadcom. The Motley Fool holds positions in and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends Broadcom and 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.
Nvidia rose 27% after announcing its stock split. Can Broadcom beat it? was originally published by The Motley Fool
