For the better part of two years, Wall Street and the investing community have been captivated by the rise of artificial intelligence (AI). The prospect of AI-driven software and systems having the capacity to learn and evolve over time comes with eye-popping dollar signs.
But it's not just AI that's helped lead the ageless Dow Jones Industrial Average, benchmark S&P 500, and growth-powered Nasdaq Composite to multiple record-closing highs in 2024. Stock-split euphoria has also been a defining catalyst.
Image source: Getty Images.
A stock split is a tool publicly traded companies can lean on that gives them the option of superficially adjusting their share price and outstanding share count by the same magnitude. Splits are surface scratching in the sense that they don't impact a company's market cap or its operating performance.
Since this year began, a little over a dozen prominent businesses have announced or completed a stock split, four of which are high-flying AI stocks. Although most investors have been eyeing the two leading businesses in the artificial intelligence arena, Nvidia (NVDA 4.16%) and Broadcom (AVGO 2.96%), today, Oct. 3, marks the arrival of Wall Street's newest AI stock-split stock.
Nvidia and Broadcom have monopolized Wall Street's attention in 2024 -- and with good reason
For much of the year, Nvidia and Broadcom have been the center of both the AI revolution and stock-split euphoria. Nvidia completed its largest-ever forward split, 10-for-1, following the close of trading on June 7. Meanwhile, Broadcom enacted its first-ever split, also 10-for-1, when trading ended on July 12.
There are valid reasons both companies have been the center of attention in 2024.
NASDAQ: NVDA
Key Data Points
In the relative blink of an eye, Nvidia's graphics processing units (GPUs) became the overwhelming top choice by enterprise data centers. The analysts at TechInsights estimate that 2.67 million GPUs were shipped to data centers in 2022, along with 3.85 million in 2023. Nvidia is responsible for roughly 98% of these shipments, with the company's H100 GPU (commonly known as the "Hopper") seeing backlogged demand.
One of the great things about demand swamping supply is that it tends to have a positive impact on pricing power. Nvidia's Hopper has been commanding roughly $30,000 to $40,000 per chip, which represents a 100% to 300% premium to competing AI-GPUs. For Nvidia, it's meant a rapid increase in its gross margin.
To boot, Nvidia's CUDA software platform has done its job in keeping businesses loyal to its product and service ecosystem. CUDA is the toolkit used by developers to maximize the computing capacity of their Nvidia GPUs, as well as to build large language models.
NASDAQ: AVGO
Key Data Points
Broadcom's newfound popularity has everything to do with the role it's playing in AI networking. The company's products, such as the Jericho3-AI fabric, are capable of connecting large quantities of GPUs to reduce tail latency -- a critical aspect of the split-second decision-making required of AI-driven systems -- and maximize the computing ability of AI-GPUs. The lion's share of Broadcom's growth can be traced to its AI networking solutions.
But it's important to recognize that the sum of Broadcom's parts is much more than just AI networking solutions. For instance, it's a core supplier of wireless chips and accessories used in next-generation smartphones. Broadcom also provides optical components for industrial equipment, networking solutions for new vehicles, and cybersecurity solutions via Symantec, which it acquired in 2019.
While Nvidia and Broadcom have rightly held the attention of investors, Wall Street's newest AI stock split is ready for its moment to shine.
Image source: Getty Images.
Wall Street's newest artificial intelligence stock split has arrived
Earlier this week, following the close of trading on Sept. 30, customizable rack server and storage solutions specialist Super Micro Computer (SMCI 7.53%) completed a 10-for-1 forward split. Although Super Micro's stock has soared since 2023 began, its shares have come under pressure following the release of a short-seller report from Hindenburg Research, which the company has refuted. Additionally, reports suggest the U.S. Justice Department is in the early stages of probing the company's accounting practices.
But Super Micro isn't the only AI stock split of significance for investors this week.
Following the close of trading on Oct. 2, semiconductor wafer fabrication equipment provider Lam Research (LRCX 9.34%) followed in the footsteps of Nvidia and Broadcom and completed a 10-for-1 forward split. This marks the company's third stock split since going public in May 1984, and is its first since March 2000!
When shareholders check their portfolios today, Oct. 3, they'll see Lam Research trading closer to $80 per share after beginning the week at north of $800 per share. There's no question this split will make it easier for everyday investors who don't have access to fractional-share purchases to buy shares of Lam Research.
Although Lam provides wafer fabrication equipment used in AI and non-AI solutions, it's getting most of it buzz right now for the role is plays in packaging high-bandwidth memory (HBM). HBM is a practical necessity in high-compute data centers for the high bandwidth and generally low power consumption that it provides. As demand for AI-GPUs increases, so should the need for HBM and Lam's equipment.
NASDAQ: LRCX
Key Data Points
The consensus forecast from Wall Street pegs Lam's sales growth at 17% in fiscal 2025 (ended June 30, 2025), and nearly 19% the following year. Likewise, earnings per share (EPS) is expected to increase by annual average of 11% through fiscal 2029.
Lam's management team is backing up its aggressive growth forecasts with a plan to return between 75% and 100% of free cash flow to stockholders in the form of share repurchases and/or dividends.
When the company initially announced plans to conduct a 10-for-1 split in May, it also unveiled a $10 billion share buyback that supplements existing repurchase authorizations. For companies with steady or growing net income, like Lam Research, buybacks have a tendency to boost EPS.
But the one concern to be mindful of is Lam Research's reliance on revenue from China. The June-ended quarter saw 39% of the company's $3.87 billion in net sales originate from the world's No. 2 economy by gross domestic product. U.S. regulators haven't been shy about curbing exports of AI chips and related equipment to China over the last two years. The potential for U.S. regulators to impose a ceiling on Lam's overseas growth is a tangible concern that shouldn't be overlooked.
Nevertheless, today is all about Lam Research's moment in the sun as it begins trading at a split-adjusted price for the first time in almost a quarter of a century.
