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

This Could Be the Next Major Artificial Intelligence (AI) Stock to Undergo a Stock Split | The Motley Fool

Knowing this, it may surprise investors that a stock with a much lower price is likely to split soon. Nonetheless, as its growth as an AI stock continues, a split should not only make sense, but also serve its investors well. When looking for AI-driven stock splits, investors should look to Microsoft (MSFT 0.73%). Admittedly, at a nominal price barely above $400 per share, this might come as a surprise to investors at first glance. With some AI stocks well above that price, investors might see other names as more logical targets. However, investors might forget that Microsoft is one of the 30 stocks that make up the Dow Jones Industrial Average. The Dow is a price-weighted index, meaning a stock's high nominal price gives a stock a disproportionate influence over the index. As of now, Microsoft is the third-most expensive Dow stock, lagging only UnitedHealth and Goldman Sachs. That factor alone likely puts Microsoft in the crosshairs of Dow Jones & Company, the subsidiary that controls the index. Additionally, since a wide swath of the investment community still sees the Dow as a benchmark, Microsoft will likely bow to pressure and split its stock to stay in the index. Still, it is not just political pressure driving a potential stock split. Grand View Research forecasts the global AI market will grow at a compound annual growth rate (CAGR) of 37% through 2030. Hence, investors should remember that AI-driven growth could take Microsoft stock to the point that a split is necessary. At the center of its public-facing AI applications is Microsoft Copilot, which represents numerous AI-driven products. This includes GitHub Copilot to help developers write code faster; Copilot 365, which integrates AI with the Microsoft 365 productivity suite; and Dynamics 365, which enhances customer relationship management (CRM) and other functions. AI is also a key function within Azure, Microsoft's cloud computing platform. Azure AI integrates machine learning functions, pre-built AI models, bot services, and integrations with OpenAI to better serve its customers. In summary, Microsoft is involved in so many aspects of AI that it might be hard to keep up. Nonetheless, shareholders should remember that success in one or more of these areas can continue pushing Microsoft stock higher. Additionally, since AI touches virtually every part of Microsoft as a company, isolating the effects of AI on Microsoft stock is difficult for the average investor. Still, in the first quarter of fiscal 2025 (ended Sept. 30), revenue of $66 billion increased 16%. That does not match the aforementioned CAGR for AI. However, Microsoft's market exceeds $3 trillion, a size that makes faster growth rates more difficult to achieve. Also, operating costs grew by 23% over the same period, due mainly to rising research and development costs. Microsoft and its peers have invested heavily in R&D as they work to stay competitive in the AI space. Amid such spending, Microsoft's net income was $25 billion in fiscal Q1, growing at 11% yearly. The increases led to Microsoft stock rising 22% over the last year. While it did not grow as fast as some peers, that growth should continue to take Microsoft's share price higher over time. Also, investors will likely continue to buy shares despite its 34 P/E ratio, further increasing the pressure for a stock split. Despite a comparatively lower share price, Microsoft faces more pressure to approve a stock split than most of its peers. The company's inclusion in the price-weighted Dow Jones index is a source of pressure for such a move. Moreover, its role in the fast-growing AI market makes such a rising stock price almost inevitable. Ultimately, such forces make it likely that Microsoft stock will benefit from a virtuous cycle that drives both higher stock prices and stock splits.

This Artificial Intelligence (AI) Innovator, Up 557% in 2 Years, Could Be the Next Stock-Split Stock | The Motley Fool

This company is taking a long-term approach to investing in the future of artificial intelligence. When management announces a stock split, it usually comes after a long run-up in the company's stock price. And while a split doesn't change any of the underlying fundamentals of a business, it's a strong signal from management that they believe the stock will continue to appreciate over time. It's no surprise then that investors flock to stock-split stocks to capitalize on the momentum and the signal management's sending. But even better than buying shares after management announces a stock split is buying shares before the announcement. Since reaching an intra-day low about two years ago, the share price of one of the leading artificial intelligence (AI) companies in the world has climbed 557%. And despite shares soaring to new all-time highs this year, there's still a lot of potential left in the business. That's why investors should consider buying shares of Meta Platforms (META -0.07%). AI has always been a big part of Meta's business, from figuring out the most relevant item to show next in your Facebook or Instagram Feed to helping marketers build and target their ad campaigns. Over the last two years, though, Meta has significantly increased its investment in various forms of AI across its business. One big reason for the step-up in investment was the introduction of Reels, Meta's TikTok competitor. Reels engagement is heavily reliant on an AI algorithm recommending great content. Meta has not only developed a better content recommendation engine that surfaces more relevant and engaging Reels for users, but it's applied the same general algorithm to more and more content across its various surfaces (Feeds, Stories, etc.). It's found that more general recommendation engines, instead of very specific ones, actually perform better. That's reflected in total ad impressions increasing 10% in the second quarter while Meta also increased its average price per ad by 10%. Meta's also working on AI for advertisers. It's currently able to suggest targeting criteria for marketers, but CEO Mark Zuckerberg eventually sees AI handling all the heavy lifting of developing an ad creative, testing variations, and building an entire campaign based on a set budget and objective. It already offers some AI-powered features through its Advantage+ tools for shopping and app install ads. Perhaps the most noticeable impact of AI on the user experience is the rollout of Meta AI in Meta's various messaging services. Meta AI is an AI assistant similar to OpenAI's ChatGPT. Zuckerberg has a goal of making it the most-used AI assistant by the end of 2024. As of the end of August it had 185 million weekly users, almost as many as ChatGPT's 200 million. None of this comes cheap. Meta spent $28 billion on capital expenditures in 2023, and management expects to spend $37 billion to $40 billion this year. Zuckerberg expects that the costs of training and running AI will continue to climb next year as well. Meta's ability to spend so heavily on AI research gives it a huge advantage over the competition going forward. Only a handful of companies can afford to spend as much as Meta on AI, and few, if any of them, actually spend more. "We are in the fortunate position where the strong results we're seeing in our core products and business gives us the opportunity to make deep investments for the future," Zuckerberg said during Meta's second-quarter earnings call. That focus on the long-term has worked out well for Meta in the past, and it gives Meta a unique advantage in the current environment. Meta notably made its Llama foundation models open-source for developers. While it foregoes revenue opportunities, it becomes much more attractive from a cost and development standpoint for anyone looking to build an AI-powered application. For Meta, it could grow the development ecosystem much more quickly than if it charged for licenses. Over the long run, a robust development ecosystem results in more efficient software, the ability to scale efficient hardware supporting the model, and a broader toolset for working with the model to create new applications. That could mean lower costs and faster development for Meta in the long run. All of this is in support of Zuckerberg's vision for becoming the leading AI company in the world. With a share price approaching $600, Meta's stock is certainly priced high enough to justify a split. More importantly, the stock currently trades for a fair price for investors, which should give management the confidence that it can split its stock and keep climbing in the future. Shares currently trade for less than 24 times analysts' 2025 earnings estimates. That's an absolute bargain compared to other AI stocks. Equally as important, Meta's management also thinks it's a bargain, as it's repurchasing billions of dollars worth of the stock each quarter. Last quarter, it bought back $6.3 billion worth of shares, and it still has more than $60 billion left under its current repurchase authorization. It's worth noting that the increase in capital expenditures over the last few years will weigh on earnings going forward as more depreciation expenses reach the income statement. However, Meta's free cash flow growth should remain extremely strong. Whether or not Meta announces a stock split, it looks like a great opportunity for investors at the current price.

2 Potential Stock-Split AI Stocks Up 212% and 730% in 5 Years to Buy Now, According to Wall Street | The Motley Fool

What actually matters is that Meta Platforms and Axon have strong competitive positions in their industries. They have proven their ability to generate market-beating returns, and that outperformance could continue as they invest in artificial intelligence products. Indeed, Wall Street is predominately bullish on both companies. Here's what investors should know about these potential stock-split stocks. Meta Platforms owns three of the four most popular social media networks on the planet in Facebook, Instagram, and WhatsApp. The company also owns Messenger, the seventh-most popular social platform. Each network has more than 1 billion monthly active users, and they collectively draw over 3 billion unique visitors each day. In total, Meta engages about 40% of the global population on a daily basis, and each interaction creates data that lets advertisers put relevant content in front of users. That value proposition has made Meta the second-largest ad tech company in the world behind Alphabet's Google. And the company is leaning on artificial intelligence (AI) to further deepen engagement and improve campaign outcomes for advertisers. Meta Platforms reported solid financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 19% to $40.6 billion and GAAP net income soared 37% to $6.03 per diluted share. CEO Mark Zuckerberg said, "We had a good quarter drive by AI progress across our apps and business." Zuckerberg specifically mentioned that user engagement with Facebook and Instagram increased 8% and 6%, respectively, year to date due to AI-driven feed and video recommendations. He also highlighted momentum with the company's new conversational assistant Meta AI, a product Zuckerberg believes will be "the most used AI assistant by the end of the year." With that in mind, Wall Street expects Meta Platforms' earnings to increase at 23% annually over the next three years. That consensus estimate makes the current valuation of 29 times earnings look reasonable. Investors should feel comfortable buying a small position in this stock today, whether or not the company splits its stock in the near future. Axon is a public safety company with clients that span law enforcement, federal agencies, and commercial organizations. While best known for conducted energy devices sold under the brand name Taser, Axon also sells sensors like body-worn cameras and in-car dash cameras, which integrate with its ecosystem of software for digital evidence management, report writing, and real-time operations. Axon is the market leader in conducted energy devices. Indeed, the brand name Taser is synonymous with the broader product category. Consequently, Axon over the years has built customer relationships with a large number of U.S. law enforcement agencies, both state and local. Those relationships have helped the company secure a leadership position in body-worn cameras and digital evidence management software. Axon recently introduced a generative AI service called Draft One, which extracts video from body-worn cameras to draft police reports. CEO Rick Smith told analysts, "Our customers' response to Draft One is better than anything I've seen." He expects Axon to be a leader in generative AI for public safety use cases. Axon reported solid financial results in the second quarter. Revenue increased 34% to $504 million, while non-GAAP net income ticked up 9% to $1.20 per dilute share. The only concerning number was the 41% increase in operating expenses, primarily due to higher stock-based compensation. Shareholders should watch that situation. Axon still has 3.6 million shares available under its equity incentive program. Wall Street expects Axon's adjusted earnings to increase at 21% annually through 2025. That consensus estimate makes the current valuation of 98 times adjusted earnings look rather expensive. Axon is a great company with compelling growth prospects, but I would personally wait for a better entry point before purchasing shares, despite the stock being highly rated by Wall Street analysts.