Stock-Split Watch: 2 Artificial Intelligence (AI) Stocks That Look Ready to Split
What is the primary reason Nvidia recently decided to implement a stock split?
Nvidia recently decided to implement a stock split to make stock ownership more accessible to employees and investors. The company believes that a lower share price will make the stock more affordable and attract a wider range of investors, potentially boosting demand.
How does a stock split affect the number of outstanding shares and the price per share of a company?
A stock split affects the number of outstanding shares and the price per share of a company by increasing the number of shares while proportionally reducing the price per share. For instance, in a 2-for-1 stock split, each shareholder receives an additional share for each share they own. As a result, the number of outstanding shares doubles, while the price per share is halved. This means that the total market capitalization of the company remains unchanged, as the increase in the number of shares is offset by the decrease in the price per share. The primary purpose of a stock split is to make the shares more affordable for investors, potentially attracting more interest and liquidity in the stock.
What are the reasons Super Micro Computer might consider a stock split at this time?
Super Micro Computer, also known as Supermicro, might consider a stock split at this time for a few reasons:
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Elevated share price: Supermicro's stock price has tripled in value over the past year and is now worth just over $760 a share. Although it has pulled back from its 52-week high, the elevated price might encourage management to split the stock to attract investor interest.
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Rapid growth: The company has experienced tremendous growth, with its share price increasing by 858% since the beginning of 2023. This has been driven by the booming demand for its AI server solutions. A stock split could make the stock more accessible to a broader range of investors, potentially increasing demand for the company's shares.
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Market opportunity: Supermicro is benefiting from the growing AI server market, which is expected to grow 26% annually for the next five years. The company's recent results indicate that it is growing faster than the overall market, making it an attractive investment opportunity. A stock split might help the company capitalize on this market opportunity by making its shares more appealing to retail investors.
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Comparisons to other high-profile companies: Several high-profile companies, such as Nvidia and Tesla, have recently undertaken stock splits, making it a popular move in the market4. Supermicro might consider a stock split to follow this trend and maintain competitiveness in the eyes of investors.
It is important to note that a stock split is primarily a cosmetic move and does not change the fundamental value of the company. However, it can make the stock more attractive to investors by lowering the price per share, potentially driving up demand and the stock price in the process.