Wall Street has been saturated with next-big-thing trends that have engaged investors during the last thirty years. Nothing is currently attracting the interest of both professional and regular investors as artificial intelligence (AI).
Artificial intelligence (AI) has applications in practically every field and industry. AI uses computers and other software to supervise processes that humans typically manage. PwC experts think AI might boost the world economy by $15.7 trillion by 2030.
Nvidia now anchors the AI revolution’s infrastructure. Among artificial intelligence equities, megacap Nvidia has led the charge for the past year. It is now the foundation of the AI movement’s infrastructure. The firm’s A100 and H100 graphic processing units (GPUs) are the backbone of high-performance data centers, enabling artificial intelligence (AI) software and systems to make snap decisions.
Thanks to artificial intelligence, Nvidia’s shares have almost quadrupled since 2023, bringing the company’s market capitalization to about $1.5 trillion. Nvidia has maintained a strong pricing position, accounting for most of its revenue growth due to the significant demand from enterprises for the organization’s AI-accelerated processors and the limited supply. However, since Nvidia’s stock closed at $726 this past week, splitting its shares seems even more appealing.
An occurrence known as a “stock split” gives a publicly listed company the ability to change the number of outstanding shares and the price of its shares without affecting its market capitalization or operational results. Consider it a simple cosmetic modification that can either raise the share price of a business to guarantee continuing listing on a primary market, as through a reverse-stock split, or make shares in an industry more clearly accessible for regular investors, as using a forward-stock split. After three years, Nvidia would be facing its second forward split.
But Nvidia is not the only hot stock in artificial intelligence (AI) or related fields that seems ready for a split. These three AI startups have the potential to outpace this GPU monster and emerge as Wall Street’s next big breakout success story.
Meta-PlatformsÂ
Meta Platforms, a social media giant, is the first artificially intelligent stock that has the potential to overtake Nvidia and become Wall Street’s subsequent big breakout success. Although Meta has never split its shares, this past week saw a rise in share price to about $490.
With its diverse range of products, Meta employs AI in several ways. It largely relies on generative AI to assist businesses in customizing their adverts to users and helping search and filter out non-compliant postings on its various social media accounts.
For years to come, it’s unlikely that Meta’s significant investments in artificial intelligence and virtual augmented reality will yield a noticeable boost in revenue. In the meantime, it still gets about 98% of its income from advertising. The firm has the most significant global user base on social media, with over 4 billion monthly active users across Facebook, Facebook Messenger, Instagram, WhatsApp, and Threads as of the quarter that concluded in December. Meta should have little issue controlling outstanding ad-pricing power most of the time.
Another point to consider regarding Meta Platforms is that it’s a money maker. It ended 2023 with more than $61 billion in funds, cash equivalents, and securities with marketability after generating more than $71 billion in net cash from operations the previous year. CEO Mark Zuckerberg can take chances, such as developing Meta’s AI chips, because of this treasure trove.
Super-Micro ComputerÂ
Super Micro Computer, specializing in servers and storage systems, is a second AI-driven business that can potentially beat Nvidia as Wall Street’s next company-split firm. Similar to Meta Platforms, Super Micro has never split its shares before. However, a planned split is likely being considered given that its shares last week briefly crossed $1,000 per share.
The demand for Super Micro Computer’s highly customizable and energy-effective rack-scale servers is why the company’s sales have more than doubled this year. It also reflects the company’s dependence on AI-enabled GPUs from Nvidia for its products. Super Micro is becoming increasingly popular among companies looking to use AI to increase their reach and potential for long-term growth.
Whether Super Micro Computer can sustain its almost exponential returns during the last few weeks is a question that needs to be answered. The previous week’s closing price of the shares was up to 183% year to date and 878% since the beginning of 2023. Over the last 30 years, every investment assumed the next great thing had an initial bubble. It is a dreadful tendency of investors to overestimate the adoption of discoveries or technology. AI will probably suffer the same fortune.
Super Micro’s other challenge will be optimizing demand for rack-scale products in AI-accelerated data centers. Super Micro is dependent on its suppliers because it uses GPUs made by Nvidia. However, a stock split might come if Super Micro achieves or exceeds Wall Street’s high growth forecasts.
Broadcast Communications
Semiconductor behemoth Broadcom is the third artificial intelligence investment that has the potential to overtake Nvidia and emerge as one of Wall Street’s most extensive breakout stocks. Before Avago completed three splits and purchased Broadcom in 2016, the company had maintained its name. However, Avago has always kept its shares. A single Broadcom share was costing stockholders a fantastic $1,245 as of February 16.
Broadcom is taking two approaches to AI inclusion. It released its Jericho3-AI processor for artificial intelligence networks in April 2023 and integrated AI functionality into its Trident network processors. Jericho3’s ability to connect up to 32,000 GPUs makes it essential for high-performance data centers. It’s made to manage workloads that are getting heavier and heavier in enterprise data centers.
Broadcom has undoubtedly benefited from several factors, including its substantial backlog. The business’s financial year ends in late September. Thus, CEO Hock Tan should have offered a report on Broadcom’s inventory in fiscal 2023. However, in mid-2022, the company recorded an all-time-high backlog of $31 billion. Wall Street and traders favor large backlogs since they usually result in highly reliable operating cash flow.
However, Investors should know that a significant portion of Broadcom’s income comes from mobile chips and smartphone components. While this division should continue to provide Broadcom with modest growth and lots of cash flow, given its significant contribution to net sales, it may slow down the company’s overall growth pace.
It makes sense for Broadcom to split its stock because it has one of Wall Street’s best nominal-dollar valuations.
