Stock splits have taken the market by storm, with a wide range of companies announcing these deals in order to drive down stock prices at a high rate. This is good news overall, showing that these players and the market are doing well. And the operations themselves are positive because they make it easier for more investors to buy a particular stock.
The world of technology is at the center of this movement, with artificial intelligence (AI) giants Nvidia And Broadcom announcing 10-for-1 stock splits lately. Nvidia completed its operations on June 7, and Broadcom is expected to complete its spinoff next month. Indeed, shares of both companies have climbed well beyond $1,000, a price that – although the valuation seems reasonable – can represent a psychological barrier for some investors.
Now, investors are looking ahead and wondering what other top-performing tech stocks might join the stock split party. I predict that an equipment maker, whose revenues have soared thanks to demand for AI, could be the next to launch a spinoff. And the announcement could even come during this company’s next earnings report. Let’s take a look at this potential stock split winner.
A stock trading at over $800
The company I am referring to is Super microcomputer (NASDAQ:SMCI), a manufacturer of servers, workstations, hyperscale solutions and other equipment needed in AI data centers. Super Micro shares have soared more than 4,000% over the past five years, reaching more than $800 today. They actually topped $1,000 earlier this year, but have since declined from those record highs.
We can’t look to Super Micro’s past actions to know whether it can split its shares, because where the company was several years ago is very different from where it is today. The equipment manufacturer has never launched a stock split — but a split hasn’t been necessary for most of Super Micro’s 30-year history, because for most of that time the stock traded at less than $20 per share.
Over the years, Super Micro steadily grew its revenue, but it didn’t really take off until the AI ​​boom accelerated. Demand for Super Micro’s products has soared, leading the company to report its first quarter of $3 billion this year, the amount of revenue it generated in a full year as well. recently as in 2021.
Today, it makes sense to imagine Super Micro stock continuing its gains and even returning to $1,000 and beyond as this AI growth story continues. The company said in recent earnings reports that demand for its large-scale systems, including top chips from Nvidia and other market giants, remained at record levels.
A $1 trillion AI market
And this movement is probably not over – for several reasons.
First, the current AI market is in the early days of its growth, with analysts forecasting an increase from $200 billion today to more than $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 products share many common parts, construction and customization can be accomplished quickly, which customers appreciate.
Finally, Super Micro offers products equipped with its liquid cooling technology, an extremely important feature for AI data centers due to the heat created by AI processes. Charles Liang, general manager of Super Micro, speaking at the recent Computex event, said he expects 15% of racks shipped by the company this year to include liquid cooling, and that number is expected to rise to 30% by next year, according to The register.
So Super Micro’s revenues have soared and the future looks bright, giving shares a reason to move higher. And that means it’s the perfect time for the company to announce a stock split, a move that allows investors with smaller budgets to invest without resorting to stock splits. Nvidia and Broadcom, when announcing their split, both said their motivation 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 the stock price, from the new lower level, to take off again.
Should you buy Super Micro or wait?
Given all this, as an investor, should you 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 stock price movements and does not change anything fundamental. The market value and valuation of the company remains the same: so if you wait for a possible stock split, the price per share would be lower, but you won’t necessarily get a good deal. As we see in the case of Nvidia, the stock is more expensive today than before its recent stock split.
So this means that if you want to benefit from the Super Micro story, there is no reason to wait for a possible stock split to buy. Now is the perfect time to jump into this AI growth action and stick it out for the long term.
Should you invest $1,000 in Super Micro Computer right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool recommends Broadcom. The Mad Motley has a disclosure policy.
Prediction: After Nvidia and Broadcom Stock Split, This AI Stock Will Be Next was originally published by The Motley Fool
