For the past three decades, Wall Street has always had its eyes on the next big thing. However, what’s uncommon is the simultaneous rise of two major trends vying for attention: artificial intelligence (AI) and stock-split euphoria. Since the beginning of 2023, AI has captivated investors with its potential for software and systems to learn without human intervention. On the other hand, stock splits have made a comeback, with numerous high-profile companies announcing or completing forward splits in the last six months.
Among the companies that have completed historic stock splits this year are Nvidia and Broadcom. Nvidia, a leader in AI with its graphics processing units (GPUs), announced its largest forward stock split in history, 10-for-1, in May. Shortly after completing the split, Nvidia’s stock briefly reached $140 per share, making it the world’s largest publicly traded company with a market value of $3.46 trillion. Broadcom, an AI networking specialist, followed suit with its own 10-for-1 forward split in June.
Now, another AI-driven stock-split stock is ready to make its mark on Wall Street. Super Micro Computer, a customizable rack server and storage specialist, recently announced its first-ever stock split, also 10-for-1. With an effective date of September 30, 2024, shares are expected to open at around $51. Super Micro Computer has become a go-to choice for businesses in need of AI infrastructure, with its net sales for the June-ended quarter surging 144% higher than the previous year.
However, some caution that investors may be getting ahead of themselves. History has shown that new innovations often experience early-stage bubbles, and Super Micro Computer has seen high-growth trends fail to meet expectations in the past. The company’s success is also highly dependent on Nvidia’s H100 GPUs, and any production constraints could impact Super Micro’s ability to fulfill infrastructure orders.
While Super Micro Computer’s stock appears cheap based on its low forward price-to-earnings multiple, investors should be mindful of the challenges associated with new technologies and trends. As with any innovation, flawless execution is rare.