AI Giants Meta and Microsoft Poised for Potential Stock Splits Amid Continued Growth

4 Artificial Intelligence (AI) Stock Splits That Could Happen in 2025 | The Motley Fool

Stock splits, which occur when a company divides its existing shares into multiple shares, effectively increasing the outstanding shares while maintaining the same market capitalization, have been all the rage on Wall Street over the past few years, with companies like Amazon, Nvidia, and Tesla participating in the frenzy. While stock splits don't impact a company's valuation, they can serve a purpose, including attracting more retail investors to purchase shares at a reduced price, which, in theory, could help boost demand for the stock. One sector, artificial intelligence (AI), which has experienced rising stock prices, is ripe with candidates for stock splits, so let's examine four and briefly discuss their long-term outlook. AppLovin (APP 3.11%) provides technology and tools to help mobile app developers effectively market, monetize, and grow their apps. The company utilizes AI to optimize ad placements and maximize revenue for developers. As of this writing, AppLovin stock trades for $332 per share, making its market capitalization around $112 billion. Notably, the company has never split its stock since going public in 2021 but is up more than 400% since then. Digging into the numbers, it's easy to see why its stock has soared. In the third quarter of 2024, AppLovin generated $1.2 billion in revenue, translating to $545 billion in free cash flow, up 39% and 182% year over year, respectively. As a result of the strong quarter, management announced a $2 billion increase to its share repurchase program, which now totals $2.3 billion. Over the past three years, AppLovin's outstanding share count has decreased by 11%, demonstrating management's commitment to increasing existing shareholders' ownership stake. ASML Holding (ASML 0.81%) manufactures advanced photolithography machines essential for producing high-performance microchips used in AI technologies while also leveraging AI to optimize its own operations. The stock, currently trading at $750 per share and a market capitalization of $304 billion, has gone through four stock splits since its initial public offering (IPO) in 1997. The first three stock splits in ASML's history were forward splits, but its most recent split in 2007 was an 8-for-9 reverse split. As a result, an investor who purchased one share at ASML's IPO in 1997 would own 10.67 shares today. As for ASML's recent results, the company posted $8.2 billion in revenue and $2.3 billion in net income during Q3 2024, representing a 13.1% and 10.7% increase, respectively. Moreover, the company has a strong balance sheet, with $326.5 million in net cash, allowing management to comfortably pay a consistent dividend since 2013. The company pays a quarterly dividend in euros, so it can fluctuate for American investors based on the exchange rate, with its most recent dividend totaling $1.64. Nonetheless, ASML has a relatively low payout ratio of 35.2%, which management has announced it intends to grow over time. Meta Platforms (META 0.24%), formerly Facebook, has never split its stock since its 2012 IPO. Over the past year, the stock has surged more than 60% and trades at $615 per share with a market capitalization of nearly $1.6 trillion. Meta, best known as a social media company driven by advertising revenue, has harnessed AI to improve its services. According to the company, its AI tools empower advertisers to create more effective campaigns. For instance, businesses using its image generation technology achieved a 7% boost in conversions. In its most recent quarter, Meta posted $40.6 billion in revenue and $15.7 billion in net income, reflecting year-over-year growth of 19% and 35%, respectively. With $42.1 billion in net cash, the company has increasingly focused on returning capital to shareholders. In 2024, Meta initiated its first quarterly dividend of $0.50 per share, yielding 0.32%, and it has reduced its outstanding shares by 7.3% over the past three years. Looking ahead, Meta plans to invest heavily in AI. Management expects capital expenditures to exceed $40 billion in 2025, underscoring AI's central role in the company's growth strategy. Microsoft (MSFT 1.05%) rounds out this list as the company with the largest investment in AI. Over the past 12 months, it spent $49.5 billion on capital expenditures and has invested an estimated $13.8 billion in OpenAI since 2019. CEO Satya Nadella says AI is driving a "fundamental change in the business applications market as customers shift from legacy apps to AI-first business processes." Since going public in 1986, Microsoft has split its stock nine times, with the most recent 2-for-1 split occurring in 2003. A single share purchased at its IPO would now represent 288 shares. In its most recent quarter, Microsoft reported $65.6 billion in revenue and $24.7 billion in net income, reflecting year-over-year growth of 16% and 10.7%, respectively. The company boasts a robust balance sheet with $33.3 billion in net cash, supporting 20 consecutive years of dividend increases. Microsoft currently pays a quarterly dividend of $0.83, yielding 0.78% annually. It's worth noting that none of these four market-beating stocks have announced a stock split. While the prospect of a split can generate excitement, it's rarely a compelling reason to invest. Long-term stock success depends on a company's financial performance, particularly its ability to achieve sustained growth in revenue and profits. These companies have already demonstrated how AI drives substantial gains in both, making them excellent choices for any long-term investor's portfolio.

Possible Stock Splits in 2025: 2 Artificial Intelligence (AI) Giants Up 677% and 797% Over the Last Decade to Buy Now | The Motley Fool

Both have a lot of upside left, but a stock split could push them even higher. Companies will commonly split their stock after a strong run-up in price. While it doesn't change any of the underlying fundamentals of the company, it's a strong signal from management that it believes the stock will continue moving higher. As a result, many investors buy shares immediately following a stock-split announcement and continue to buy well after the split executes. But there's more to be gained by focusing on the businesses executing at such a high level their stocks can't help but increase in price to the point where it makes sense for a split. They can reward shareholders whether management decides to split shares or not. If a split does materialize, that could add some extra momentum to the stock price, helping to make for a great year of returns. Meta Platforms (META 0.24%) and Microsoft (MSFT 1.05%) have seen their share prices climb 677% and 797%, respectively, over the last decade. Neither has split its shares in that time and their share prices now stand firmly in the mid-three figures. Considering the outlook for both businesses and their current stock valuations, a stock split could make sense for both of them in 2025. Meta has undergone a significant transformation over the past decade. In fact, it wasn't even called Meta Platforms in 2015. Back then it was known as Facebook, the name of its flagship social media application. Since then, it's gone on to invest tens of billions of dollars in virtual and augmented reality and artificial intelligence. And while the former hasn't produced significant growth for the business, the latter has been instrumental to its continued success. Meta generates almost all of its revenue from advertising sales on its social apps. AI has helped grow that revenue in a few different ways. Better algorithms have helped surface more interesting content for users, keeping them engaged longer, creating more opportunities to show them ads. Recent advancements in AI have enabled Meta to develop a generalized recommendation engine for use across multiple formats like posts, photos, videos, Stories, and Reels. And the broader Meta makes its recommendation algorithm, the more effective it becomes. There's still room for improvement in 2025, which should translate into further increases in engagement. That algorithm can pull double duty in ad targeting for marketers. Meta is uniquely capable of taking a marketer's campaign goal and maximizing its budget by showing ads to the right users at the right time. Meta's innovations around generative AI with its Llama large language model have opened the door for more advanced ad campaign tools. Creating and testing multiple iterations of a single ad is significantly easier for Meta advertisers, which makes ads on Facebook and Instagram far more effective. CEO Mark Zuckerberg sees generative AI getting to the point where a marketer can tell Meta its business objective and budget, and AI will take care of the rest. Meta is certainly spending heavily to make those improvements. Capital expenditures will come in between $38 billion and $40 billion for 2024, and management expects a big step up in spending in 2025. But the strong revenue and earnings growth points to the value that spending is creating. Meta saw a 22.5% increase in revenue through the first nine months of 2024, which supported a 66% increase in earnings per share. Meta's share price has merely kept up with its earnings growth over the past year. As a result, it trades for a very reasonable forward P/E ratio of 23.4 as of this writing. With shares trading around $600, a stock split might make sense for the company especially given the strong outlook for growth and current valuation. Microsoft has been a stalwart of personal computing, but it has also transformed into an AI leader over the last few years. It added $10 billion to its investment in OpenAI in early 2023, which vaulted the company's cloud computing division, Azure, to the forefront of the competition in winning new customers focused on AI. Azure revenue has accelerated recently as a result of strong demand for its AI services. After 33% growth in the first quarter of fiscal 2025, management suggested revenue could grow even faster in the back half of the year for the cloud provider. That's because Microsoft made significant capital investments in 2024, but there's a lag between when it buys compute infrastructure and leases data centers and when those servers come online. Management assured investors it's seeing plenty of demand to keep up with its growing supply. As such, Microsoft plans to spend even more in 2025 to build out its data centers. The company put out a statement at the start of January that it will spend roughly $80 billion on AI-enabled data centers in fiscal 2025. That's a big step up in investments after spending $55.7 billion in fiscal 2024. That massive cash outlay is supported by the company's enterprise software business, which remains a cash cow. And it's producing even more cash these days as Microsoft integrates AI into its software in the form of Copilots, its AI agents designed to improve worker accuracy and efficiency. Copilot adoption is growing quickly with more and more enterprise customers adding it to Microsoft's software development platform, Github, and productivity suite, Microsoft 365. Its Copilot studio allows customers to use their own data to develop custom AI agents for their specific business needs. Microsoft is at the forefront of AI in two domains: cloud computing and enterprise software agents. Both are poised to grow significantly over the next few years, and Microsoft is one of the few companies with the cash needed to invest in order to take advantage of those opportunities. It's no surprise that analysts expect accelerating revenue and earnings growth over the next couple of years for Microsoft. Shares currently trade for about 31 times analysts' estimates for fiscal 2025 earnings (ending in June). While that's a premium price to pay for the stock, Microsoft is worth a premium price. The strong free cash flow supports massive investment opportunities as well as a robust capital return program that makes holding shares very rewarding. With a stock price above $400, Microsoft could be in line for a stock split in 2025.

Prediction: This Will Be the Next AI Company to Split Its Stock | The Motley Fool

Stock splits were a major market theme in 2024, with some of the world's biggest names joining the list. Companies across sectors, from Walmart to Chipotle Mexican Grill, launched such operations last year. And Nvidia and Broadcom led the wave in the artificial intelligence (AI) industry, each completing a 10-for-1 stock split. Why do investors love stock splits? Even though they don't change anything fundamental about a company, they do lower the per-share price, making the stock more accessible to a wider range of investors. And the move also could be seen as a sign of confidence from management, with the idea that the stock has what it takes to rise from its new lower price. So, it's logical that investors are always on the lookout for stock splits, especially when a very successful company's share price has soared to high levels. And one particular AI company right now is looking ripe for a split. The stock climbed 65% last year and today trades for more than $600. My prediction is this well-known company will be the next AI player to announce a split. Before I give away the name of this company, I'll offer you one more clue about its identity. This tech giant is the only member of the "Magnificent Seven" --the stocks that drove last year's market gains -- that never has launched a stock split. I'm talking about Meta Platforms (META 0.24%), owner of social media platforms Facebook, Messenger, WhatsApp, and Instagram. Thanks to its social media dominance -- more than 3.2 billion people use at least one of its apps daily -- Meta has seen its revenue and profit climb into the billions of dollars. And its shares have followed the upward path, today trading near a record high. Meta generates most of its revenue through advertising as advertisers seek to reach us where they know they'll find us -- using one of the company's apps. But Meta has aggressively expanded into AI, making it the company's biggest area of investment last year -- and Meta has suggested it will increase AI investments this year too. CEO Mark Zuckerberg has said he's interested in developing AIs that all Meta users may rely on for whatever is important to them -- from business to leisure activities. To get there, the company developed its own large language model (LLM) and is now training the latest version, Llama 4. In the most recent earnings call, Zuckerberg said Meta's seeing fast adoption of the recently released Meta AI -- the company's first AI assistant -- and Llama is "quickly becoming a standard across the industry." Meta can win in AI a few different ways. First, the more time we spend on Meta's apps -- thanks to potential AI tools and features -- the more advertisers will want to invest in reaching us there. That equals more revenue for Meta. Second, Meta's AI investments could lead to other AI products and services. Finally, Meta's work in LLMs and making them available to the developer community could position the company to stand out as an AI leader. So Meta could be heading toward an exciting new era of growth. Now let's consider my prediction. Why is now a good time for Meta to split its stock? At more than $600, Meta may scare off some investors -- even though valuation looks very reasonable at 24x forward earnings estimates. The level of $1,000 per share represents a psychological barrier for some investors, who may consider the stock as pricey regardless of its valuation. So, companies that start approaching this level might think about launching an operation to avoid this problem. Also, some investors don't have access to fractional shares -- and they may not have the budget to invest in Meta at today's level. So a stock split, lowering the per-share price by issuing more shares to current holders, could open up the investing opportunity to these potential buyers. Finally, as mentioned, Meta should see more growth ahead thanks to its investment in the area of AI -- so the stock has what it takes to climb from a new, lower price point. All this supports the idea of announcing a stock split, and that's why I predict Meta will be the next AI player to make such a move. And the good news is, even if it doesn't, Meta still represents a solid long-term buy-and-hold candidate for growth investors.

2 Top Tech Stocks to Buy Right Now | The Motley Fool

These top technology stocks can strengthen investors' portfolio in 2025. The stock market had a solid 2024, powered by the technology sector, even as the outsized theme of artificial intelligence (AI) continued to feed investors' appetite for outsized returns. But the bull rally seems far from over. While the stock market could take a breather over the next few months, technology stocks, riding on trends such as predictive AI, cloud computing, automation, digitization, cybersecurity, semiconductors, and other advanced technologies, should gain even in 2025. Investors can benefit from these trends by picking up small stakes in high-quality, fundamentally strong technology stocks. Here's why the following two stocks fit the bill. Looking at Nvidia's (NVDA 3.10%) product roadmap and financial performance, there is a lot to be excited about. Nvidia is the indisputable leader in the discrete graphics processing unit (GPU) market, with a 90% share. While its Hopper architecture GPUs continue to be in high demand, the upcoming Blackwell architecture GPUs should also drive demand from hyperscalers, and are expected to far outpace supply. With GPU-powered machine learning-based computing rapidly augmenting traditional CPU-based computing across data centers globally, CEO Jensen Huang expects at least $1 trillion worth installed base of data centers will need upgrading to accelerated computing by 2027. This will be a major growth opportunity for Nvidia. Plus, the chipmaker is also seeing huge scope presented by AI services that operate 24/7 -- also known as AI factories. Furthermore, the company's Compute Unified Device Architecture (CUDA) software stack developed for parallel programming of GPUs is playing a critical role in helping Nvidia maintain dominance in the AI-optimized GPU space. Used by nearly 4 million developers across more than 3,000 applications, CUDA has emerged as a strong moat for Nvidia. CEO Jensen Huang also made some major product announcements at CES 2025. The company released a personal AI supercomputer called NVIDIA Project DIGITS, which uses the new NVIDIA GB10 Grace Blackwell superchip. Priced at $3,000 apiece, this AI supercomputer enables developers to run inferencing for large language models (LLMs) up to 200-billion-parameters independently. Expanding access to AI supercomputing capabilities can prove to be a major growth catalyst for the company in the coming years. Besides digital AI capabilities, Nvidia is making rapid progress in the fast-evolving physical AI space. The company has launched the Cosmos World foundation model platform to ensure more effective development, training, and deployment of physical AI solutions such as autonomous vehicles and robots. Since physical AI models are complicated, costly, and time-consuming to develop and test, the Cosmos platform helps accelerate and simplify it for developers. Nvidia's financials also continue to be impressive. Wall Street analysts expect the company's to be around $38 billion in the fourth quarter of fiscal 2025 (ending Jan. 31, 2025), implying a year-over-year upside of 72.1%. Earnings per share (EPS) are estimated to be $0.85, implying a solid year-over-year jump of 63%. Since the start of 2023, Nvidia's shares have surged by a dramatic 830%. Hence, although Wall Street seems to have rewarded the company for its technological prowess, execution capabilities, and large addressable market, the upcoming growth potential hints at even more share appreciation in the coming months. Meta Platforms (META 0.24%) stands out as a compelling technology pick in 2025, for several reasons. First and foremost, Meta's core social media and digital advertising business has demonstrated impressive strength and monetization potential, with revenues rising 19% year over year to $40.6 billion in the third quarter of fiscal 2024 (ending Sept. 30, 2024). The company's Family of Apps (which includes social media platforms such as Facebook, Instagram, Messenger, and WhatsApp and accounts for nearly 93% of total revenues) reported a robust operating income of $21.8 billion with an operating margin of 54% in the third quarter. In the third quarter, 3.2 billion or almost 40% of the global population used at least one of these applications daily. Meta is leveraging advanced AI technologies to power personalized recommendations on its video and feeds, which has translated into higher user engagement -- as is evident from 8% more time spent on Facebook and 6% more spent on Instagram. This, in turn, has led to more ad impressions and better ad pricing for the social media platforms. Second, Meta is making rapid strides in the AI space by introducing a large concept model (LCM), which demonstrates better performance as compared to similar-sized large language models (LLMs). Unlike LLMs which rely on token-level processing or predicting one word at a time, LCMs work with discrete concepts for reasoning and planning. This enables LCMs to generate accurate responses using fewer computation resources -- thereby boosting cost efficiencies and productivity. With $70.9 billion cash on its balance sheet at the end of the third quarter, Meta is also committed to investing heavily in innovative AI initiatives. After releasing Llama 3.2 LLM, the company is now training Llama 4 models on a cluster with more than 100,000 of Nvidia's H100 chips. Meta expects smaller Llama 4 models to be ready for launch in early 2025. Since Llama models are open source, it has helped build a more efficient and cost-effective model -- which can be a major strength for Meta in the coming years. Third, Meta is gearing up for monetizing more opportunities, including X competitor Threads, Ray-Ban Meta smart glasses, and WhatsApp Business. Finally, despite the strong business model and robust growth prospects, Meta is currently trading at a reasonable forward price-to-earnings (P/E) ratio of 23.9. Hence, although mounting losses of Reality Labs and rising capital expenditure investments pose a risk, Meta seems a smart pick for January 2025.