The S&P 500 roared into bull territory this year, and the fantastic pace continues, with the benchmark heading for a 26% gain. The Nasdaq and Dow Jones Industrial Average also have reflected investors’ optimism, on track for increases of 29% and 18%, respectively, this year. Against this backdrop, one major theme stood out and grabbed investors’ attention: artificial intelligence (AI).
Investors have piled into players in this field thanks to AI’s potential to revolutionize the world as we know it. From potential gains in efficiency to the development of better products and services, AI could transform industries — and significantly boost companies’ earnings over time. And we may be in the very early days of this growth story since analysts forecast today’s $200 billion AI market may reach $1 trillion by the end of the decade.
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All of this has resulted in enormous gains for AI stocks — actually over the past few years as some investors got in on these players extra early. As a result, some of these stocks have soared, in certain cases to levels beyond $1,000 per share. This is great, but when a stock reaches these prices, it may be more difficult for certain smaller investors to access. There’s a solution for this problem, and it’s called the stock split. Three top AI players completed such operations this year. Let’s find out more about them — and consider whether these players will soar in 2025.
Image source: Getty Images.
First, though, a quick word about stock splits. These operations reduce the per-share price through the issuance of more shares to current holders of a particular stock. This doesn’t change the value of their holding, the market value of the company, or anything fundamental. But it does make it easier for more investors to buy the stock since it will trade at a lower price — determined by the ratio of the split.
Nvidia (NASDAQ: NVDA) may have been the most eagerly awaited stock split of the year. When the company announced the 10-for-1 operation, its shares climbed 12% over the two trading sessions that followed. A stock split itself isn’t a reason to buy the stock, but the move, as mentioned, opens the investment opportunity up to more players — and that’s positive.
This AI company has seen its shares skyrocket 2,600% over the past five years thanks to its leadership in the AI chip market. Nvidia’s graphics processing units (GPUs) are the fastest around and power critical AI tasks such as the training and inferencing of models. This has resulted in enormous demand and earnings growth. In many recent quarters, earnings have climbed in the triple digits and Nvidia has maintained an impressive gross margin of more than 70%.
Its prospects look excellent, and this is thanks to Nvidia’s leadership as well as a sharp focus on innovation. The company this quarter is launching its new Blackwell architecture and pledges to update its GPUs on an annual basis.
Will Nvidia climb next year even after this year’s 180% increase? It’s possible — because the Blackwell launch could serve as a key catalyst and Nvidia’s valuation at 47 times forward earnings estimates offers some room for this growth stock to run.
Broadcom(NASDAQ: AVGO) launched a 10-for-1 stock split in July, bringing its shares down from about $1,600 to $160. The networking giant’s shares, like those of Nvidia, had soared in recent times due to its growth and potential in the AI market. The stock rose about 450% over five years and has climbed 50% year to date.
Broadcom makes thousands of products widely used in various areas — from data centers to smart phones. But in recent times it’s the company’s products for AI customers that have driven growth. Broadcom said in its recent earnings report that cloud service providers are driving massive demand for its AI networking and custom AI accelerators.
And this trend is likely to continue since these customers are in the scaling-up phase of their AI clusters — and AI market growth in the coming years could keep this momentum going. In the quarter, Broadcom said revenue from custom AI accelerators more than tripled, and Ethernet switching quadrupled. And for the fiscal year, Broadcom predicts AI revenue of $12 billion, an increase from its earlier forecast of $11 billion.
Today, Broadcom shares trade for only 27 times forward earnings estimates, which looks like a steal considering the company’s prospects in the AI market. So, I wouldn’t be surprised to see Broadcom advance in the new year.
Super Micro Computer(NASDAQ: SMCI) shares soared early in the year, even beating the performance of Nvidia in the first half — with a gain of 188% versus 149%. And the company followed up by announcing a 10-for-1 stock split, to take place in the fall. But when the split happened, the shares already had fallen 65% from their 2024 high.
The reason for the drop? A short report alleging troubles at Supermicro set off the movement. But what may truly have weighed on the stock was the company’s delay in financial reporting. Supermicro announced it would be late in filing its 10-K annual report and a 10-Q quarterly report, moves that put it at risk for a Nasdaq delisting. The company since has hired a new auditor and sent a plan to Nasdaq to regain compliance.
Meanwhile, the company’s revenue growth in recent quarters and demand for its products both have been strong. Supermicro sells workstations and servers crucial to AI data center operations, and it incorporates the latest chips from Nvidia and others into this equipment. Supermicro also specializes in direct liquid cooling technology, an area that could represent a new growth driver.
Will Supermicro climb in 2025? That probably will depend on its financial reporting situation. If the company doesn’t regain compliance or issues disappointing reports, the stock could suffer. But if Supermicro completes its reports and they’re positive, the stock may take off in 2025.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
