Artificial intelligence (AI) stocks have led the current bull market, so it shouldn’t come as a surprise that there have already been several stock splits among AI stocks.
Nvidia and Broadcom, two of the biggest chip stocks, have already done 10-for-1 stock splits in recent months. Super Micro Computer, a maker of AI servers, is set for its own 10-for-1 stock split to go into effect on Oct. 1. Lam Research has also announced a 10-for-1 split set to go into effect on Oct. 2.
However, with plenty of other AI stocks soaring, a number of candidates in the sector appear ready to split their stocks.
While a stock split doesn’t change a stock’s fundamentals, investors generally cheer such moves as they act as a reset in the share price, giving the stock another chance to soar. There’s also some evidence that stocks outperform in the year after the split, perhaps because stocks tend to split when management believes they have the momentum to keep gaining.
Keep reading to see two AI stocks that could split their shares in the near future.
1. ASML
ASML (NASDAQ: ASML) is the leading maker of lithography equipment, the complex machines used to make semiconductors. ASML supplies companies like Taiwan Semiconductor Manufacturing Company, Samsung, and Intel, and it’s the only maker of extreme ultraviolet (EUV) machines used to make the most advanced chips.
ASML’s leadership position in a crucial category of the semiconductor industry has given it a market cap of more than $300 billion and a share price hovering around $800 a share. That makes the company eligible for a range of stock splits as it already has one of the highest individual share prices of any stock on the market.
ASML has split its stock in the past, but it hasn’t had a traditional stock split since 2000, when it executed a 3-for-1 split. In 2007, it enacted an 8-for-9 reverse split in combination with a special dividend, and it performed a synthetic buyback in 2012, along with a 77-for-100 reverse stock split.
If the stock continues to gain, which seems like a good bet given the growth in AI, a stock split seems likely.
2. Equinix
Equinix (NASDAQ: EQIX) isn’t your typical AI stock. The company is a real estate investment trust (REIT) and the world’s largest data center REIT, giving investors exposure to the AI boom from another angle. As a REIT, its growth rates tend to be modest, but the company still has a huge growth opportunity in front of it, especially with the boom in data centers from AI.
Revenue in the second quarter was up 7% to $2.2 billion, and it posted its first-ever quarter of better than $1 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) at $1.04 billion.
Equinix is rapidly expanding its property base, with 54 major projects underway. The company also bought a more than 200-acre parcel of land in the Atlanta area, which it said will help it “pursue larger AI and hyperscale workloads in the U.S.”
Equinix looks like a good candidate for a stock split as the stock is now trading at a share price of around $860. Equinix has never had a stock split but did a reverse stock split in 2002, from $1 to $32, after the value of the stock plunged when the dot-com bubble burst.
The data center REIT hasn’t made the kind of gains that other AI stocks have recently, so a stock split might not be as urgent. However, with the stock approaching a $1,000 share price, splitting the stock could make it more attractive to retail and beginning investors, many of whom are eager to buy AI stocks.
Should you invest $1,000 in ASML right now?
Before you buy stock in ASML, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ASML wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $710,860!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
Jeremy Bowman has positions in Broadcom. The Motley Fool has positions in and recommends ASML, Equinix, Lam Research, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
Stock-Split Watch: 2 AI Stocks That Look Ready to Split was originally published by The Motley Fool
