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2 Potential AI Stock-Split Stocks to Keep an Eye On in the New Year

Artificial Intelligence AI Robot Big Data Bull Market Stock Chart Getty

Artificial Intelligence AI Robot Big Data Bull Market Stock Chart Getty

2023 has been the year of artificial intelligence (AI) stocks. The launch of OpenAI’s ChatGPT in late 2022 set off a new race to harness generative AI technologies, which some tech CEOs think could be as transformative as the internet has been over the past three decades.

Stock splits, meanwhile, continue to get attention from investors after nearly every big tech stock split its shares in 2021 and 2022, including Tesla, Apple, Alphabet, Amazon, Nvidia (NASDAQ: NVDA), and Shopify. Stock splits don’t do anything to change the fundamentals of a stock. They just divide the metaphorical pie into more pieces. Investors still own the same percentage of the company as before. However, stock splits tend to excite investors because they act as something of a milestone for a stock, signaling that the price has reached a certain level and can now be reset.

There’s also evidence that stocks that have split their shares outperform the rest of the market. That could be a result of the momentum in the business that led to the stock split in the first place or investor reaction to the split.

As we look ahead to 2024, we could see another wave of stock splits from big tech stocks as the Nasdaq Composite is up more than 41% year-to-date. Let’s examine two AI stocks that could split their shares next year.

A robot holding a computer with a virtual stock chart hovering over it.

Image source: Getty Images.

1. Broadcom: A networking technology leader

Broadcom (NASDAQ: AVGO) has quietly become one of the biggest stocks on the market thanks, in part, to a series of acquisitions, including VMware earlier this month, and strong organic growth. Broadcom’s market cap is above $500 billion, and the stock has doubled this year as investors see the company as one of the winners in the AI boom.

Its overall growth is still slow due to the downturn in the semiconductor sector. However, the company is seeing AI demand emerge as a key growth driver.

On the earnings call, CEO Hock Tan said generative AI revenue, driven by ethernet solutions and custom AI accelerators, made up nearly $1.5 billion in revenue in the quarter, or roughly 20% of semiconductor revenue. In fiscal 2024, it expects generative AI revenue to make up 25% of semiconductor revenue, up from 15% in 2023. Combined with modest growth in semiconductor revenue, that implies generative AI revenue will nearly double in the current fiscal year.

Broadcom shares now trade at more than $1,100 a share. The stock has never had a split before but now has one of the highest share prices on the S&P 500. While the company hasn’t given any indication that it would split its shares, it fits the criteria of a company that would, though there’s no rule mandating stock splits.

2. Nvidia: The AI chip kingpin

No other stock has been a bigger winner from the AI boom than Nvidia. Its graphics processing units (GPUs) and accelerators have been in high demand from cloud infrastructure companies and others looking to scale up and build capacity for AI applications.

Nvidia shares have more than tripled this year, and the company’s recent results indicate no signs of slowing down for the business as its AI capabilities are unmatched. Revenue jumped 206% in its third quarter to $18.12 billion, and adjusted earnings per share was up nearly 500% from a year ago. The company expects revenue to improve for the fourth quarter to around $20 billion from $18.1 billion in the third quarter.

Nvidia stock is now hovering near $500/share, close to the $560/share it was trading at when it announced a stock split in 2021. A stock split would make sense for Nvidia, especially since the stock seems poised to continue delivering blowout growth and expanding its margins. While there hasn’t been an indication that Nvidia will split its stock next year, there’s a good chance that another stock split will happen if Nvidia shares keep moving higher.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, Broadcom, and Shopify. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Nvidia, Shopify, and Tesla. The Motley Fool recommends Broadcom and Nasdaq. The Motley Fool has a disclosure policy.

2 Potential AI Stock-Split Stocks to Keep an Eye On in the New Year was originally published by The Motley Fool

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