AI Stock Split Stocks: Wall Street's Bullish Outlook on NVIDIA and Super Micro Computer

2 Stock-Split AI Stocks to Buy Before They Surge 165% and 245%, According to Certain Wall Street Analysts | The Motley Fool

Somewhat surprisingly, Wall Street remains bullish on both companies. The median price targets imply 21% upside for Nvidia and 22% upside for Supermicro, but certain analysts see much larger gains on the horizon. Here's what investors should know about these artificial intelligence (AI) stocks. Nvidia graphics processing units (GPUs) were originally designed to render stunning computer graphics for video games and 3D design applications. But the company repurposed its GPUs as data center accelerators when it launched its parallel computing platform CUDA in 2006. CUDA has evolved into a robust ecosystem of software tools that streamlines the development of GPU-accelerated applications across various disciplines, from computational chemistry to artificial intelligence. Nvidia dominates the data center accelerator market. The company accounted for 98% of data center GPU shipments in 2023, according to semiconductor analysts at TechInsights. Nvidia also holds more than 80% market share in AI processors. That dominance is partially due to superior performance. Nvidia GPUs consistently outperform competing chips at the MLPerf benchmarks, tests that provide unbiased evaluations of AI systems across training and inference. However, the company is truly formidable because it offers a full-stack computing solution -- meaning it combines the hardware, software, and services businesses need to build, deploy, and manage AI applications. I'm not only referring to GPUs and CUDA. Nvidia also provides supplemental data center hardware, like networking equipment and central processing units (CPUs), and provides a comprehensive AI-as-a-service solution called DGX Cloud. Nvidia reported better-than-expected financial results in the first quarter of fiscal 2025 (ended April 2024). Revenue increased 262% to $26 billion on strong momentum in the data center segment, and non-GAAP net income surged 461% to $6.12 per diluted share. CEO Jensen Huang said, "Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform." Wall Street expects Nvidia to grow adjusted earnings at 52% annually through fiscal 2026 (ending January 2026). That consensus estimate makes its current valuation of 57.7 times adjusted earnings look reasonable. Investors interested in purchasing shares of Nvidia should start with a small position today. If the stock drops following the upcoming earnings report on Aug. 28, consider using that opportunity to build a slightly larger position. Eventually, I believe Nvidia could be a $10 trillion company, but I'm skeptical about it reaching that milestone by 2030. Supermicro manufactures high-performance computing platforms, including storage solutions and servers optimized for intensive workloads like data analytics and artificial intelligence. The company holds a leadership position in the AI server market, due to its modular approach to product design and its internal manufacturing capabilities. Specifically, Supermicro makes "electronic 'building blocks' that can be assembled into servers in an almost endless number of combinations. Rivals offer a more limited menu to customers," according to The Wall Street Journal. The company also handles most research, development, and assembly at facilities in Silicon Valley, which support the rapid rollout of servers featuring the latest from suppliers like Nvidia. Supermicro reported mixed financial results in the fourth quarter of fiscal 2024 (ended June 30). Revenue surged 143% to $5.3 billion on record demand for AI infrastructure. But non-GAAP net income rose just 78% to $6.25 per diluted share as costs associated with direct liquid cooling (DLC) components pressured margins. Wall Street anticipated adjusted earnings growth of 130%. That miss caused the stock to tumble 17% following the report. However, management provided important context on the earnings call. While gross profit margin dropped 5.8 percentage points to 11.2% in the fourth quarter, CFO David Weigand told analysts that figure should normalize between 14% and 17% by the end of fiscal 2025 as DLC manufacturing capacity scales. Moreover, investments in DLC could help Supermicro gain share in AI servers. Liquid-cooled AI servers reduce data center power consumption. So demand for DLC solutions is expected to increase rapidly, representing at least 15% of all data center installations in the next two years, up from less than 1% historically. Supermicro has emerged as an early leader in DLC solutions, which could ultimately boost demand for its AI servers. Wall Street expects Supermicro to grow adjusted earnings at 41% annually through fiscal 2026. That makes the current valuation of 25.7 times adjusted earnings look cheap. That said, the stock could still plunge if Supermicro misses Wall Street's earnings estimates in future quarters. Investors who are comfortable with that risk could buy a small position today, but not with the expectation of triple-digit gains in the next 12 months. It could happen, but anyone counting on that outcome is begging to be disappointed.

Artificial Intelligence (AI) Stock-Split Stocks Are All the Rage on Wall Street -- But Only 1 Is a Clear-Cut Buy Right Now | The Motley Fool

Nvidia, Broadcom, and Super Micro Computer have all announced 10-for-1 stock splits. However, only one of these market leaders is worthy of investor's money. Wall Street seemingly has two loves at the moment: anything that has to do with artificial intelligence (AI) and companies conducting stock splits. What you might not realize is that these two trends are intersecting for a trio of companies. A stock split is a tool publicly traded companies have at their disposal that allows them to alter their share price and outstanding share count. Keep in mind that these changes are purely superficial, with stock splits not affecting a company's market cap or its underlying operating performance. Though stock splits come in two varieties -- forward (reducing the nominal share price) and reverse (increasing the nominal share price) -- most investors tend to flock to companies completing forward-stock splits. Since high-flying businesses are out-innovating and out-executing their competition, forward splits are almost always being conducted from a position of operating strength. This can rarely be said for publicly traded companies enacting reverse-stock splits. Over the trailing-six-month period, 13 prominent businesses have announced or completed a stock split, all but one of which was of the forward-split variety. Three of these completed or anticipated stock-split stocks are companies leading the charge for the artificial intelligence revolution. The excitement surrounding the rise of AI is palpable. According to the analysts at PwC, AI is forecast to add $15.7 trillion to the global economy by the turn of the decade. This enormous addressable market suggests there can be multiple big-time winners thanks to this leap forward in technology. On May 22, hardware leader Nvidia (NVDA 6.53%) kicked things off by declaring a 10-for-1 forward split -- the largest forward split in its history. Shortly after its split was effected following the close of trading on June 7, Nvidia's stock would touch a market cap of $3.46 trillion, which briefly made it the most-valuable publicly traded company on Earth. Nvidia's H100 graphics processing unit (GPU) has become the standard in high-compute enterprise data centers looking to train large language models (LLMs) and run generative AI solutions. A veritable market share monopoly on the "brains" behind AI-accelerated data centers, coupled with exceptionally strong pricing power due to AI-GPU scarcity, has powered Nvidia's stock higher. AI networking specialist Broadcom (AVGO 5.07%) was next in line to join the "Class of 2024" stock-split club. The company's board approved a 10-for-1 split (its first-ever) on June 12, with an effective date following the close of business on July 12. Broadcom's networking solutions (e.g., the Jericho3-AI fabric) have gained notoriety for connecting large numbers of AI-GPUs in enterprise data centers in order to reduce tail latency and ensure that businesses are getting as much compute capacity as possible out of these chips. In other words, Broadcom is helping to further expedite the split-second decision-making that's needed of AI-driven software and systems. Lastly, customizable rack server and storage specialist Super Micro Computer (SMCI 4.89%) joined the club by announcing its first-ever stock split on Aug. 6, also 10-for-1, which'll go into effect after the close of trading on September 30. Super Micro's server solutions have been in high demand as businesses build out the physical infrastructure necessary to train LLMs, runs generative AI solutions, accelerate quantum computing, and so much more. Super Micro more than doubled its sales in fiscal 2024 (ended June 30) to $14.94 billion, and is widely expected by analysts to generate sales growth of 75% to north of $26 billion in the current fiscal year. But in spite of the euphoria surrounding stock-split stocks, not all leading businesses involved with the AI revolution are worth buying. The harsh reality of next-big-thing innovations is that they have a history of disappointment. Over the last three decades, every buzzy innovation, technology, or trend that lured investors in with big dollar signs succumbed to an eventual early stage bubble. The reason bubbles continually form on Wall Street when new technologies or trends arrive is because investors (both professional and retail) have a habit of overestimating how quickly new innovations will be adopted and utilized. Investors are consistently overoptimistic and fail to take into account that innovations, technologies, and trends all need time to mature. One of the telltale signs that artificial intelligence isn't close to being a mature technology is the lack of concrete plans offered by tech companies as to how they'll use AI to grow their sales and increase their profits. While select companies may have some broad stroke expectations in place, the vast majority of businesses lack a true AI game plan. This all but ensures the AI bubble is going to burst at some point in the future. If history is accurate and the AI bubble does burst, no company would be hit harder than Nvidia. The bulk of its valuation gains and recent sales growth have come on the heels of its AI hardware and AI-GPU scarcity. Once this scarcity wanes, which should be expected as external and internal competition for data center "real estate" picks up, Nvidia's stock could have a long way to fall. Super Micro Computer is in a similar predicament. Almost the entirety of its recent sales leap has been based on businesses building out their data centers. If the AI bubble bursts, or if businesses come to the realization that they don't understand how generate a positive return on their AI investment, Super Micro's future server orders, and its stock, are going to suffer. To add, Super Micro's rack servers incorporate Nvidia's leading H100 GPUs, which are currently backlogged. The longer supply constraints exist, the more likely it is that Super Micro will fail to live up to its potential. Among Wall Street's trio of AI stock-split stocks, Broadcom is the cream of the crop from an investment standpoint. While it's true that Broadcom has notably benefited from an increase in demand for its AI-driven networking solutions, it had an extensive and diverse revenue stream, complete with a mammoth backlog, prior to the emergence of artificial intelligence as the hottest thing on Wall Street. For example, Broadcom is one of the leading providers of wireless chips, along with other accessories, used in next-generation smartphones. Telecom companies spending big bucks to upgrade their wireless networks to support 5G download speeds have spurred a multiyear device upgrade cycle that's lifted demand for Broadcom's wireless solutions. Broadcom has its fingers in multiple cookie jars beyond smartphones, as well. It provides financial services software, cybersecurity solutions, and optical products used in next-gen vehicles and industrial equipment, to name just a few things. Broadcom's management team has also used acquisitions as a means to expand the company's product and service ecosystem and grow its bottom line. This includes the acquisition of cybersecurity solutions provider Symantec in 2019, as well as the $69 billion deal to purchase VMware in November 2023. Buying VMware is particularly important to furthering Broadcom's strategy of helping businesses overcome the challenges of customizing private, hybrid, and multi-cloud environments. The key point here is that the potential bursting of the AI bubble doesn't turn Broadcom's world upside down in the same way that it would for Nvidia and Super Micro Computer. While Broadcom would, almost certainly, see AI networking sales slow or contract, many of its other sales channels would be unaffected. At 24 times forward-year earnings, Broadcom is, admittedly, not the steal of a deal it was as recently as two years ago. But with its earnings per share expected to grow by an annualized rate of 18% over the next five years, its valuation offers room for multiple expansion.

Better Artificial Intelligence Stock: AMD vs. Super Micro Computer | The Motley Fool

Both saw insatiable customer demand for their AI-related products over the past year, causing outsized share price gains. AMD stock went from a 52-week low of $93.12 in 2023 to a high of $227.30 in March. Meanwhile, Supermicro shares surged to a 52-week high of $1,229 in March from a low of $226.59 last year. With the the broader stock market's recent sell-off, AMD and Supermicro are currently well below their highs. This creates an opportunity to pick up shares, but which of these AI-related stocks is the better buy? AMD's business transformed substantially over the past year. This is thanks to its role as the maker of semiconductor chips critical to the computational power of AI algorithms. In 2023, each of the four segments of its operations contributed 20% or more to the company's revenue for the year. In 2024, things look dramatically different. The semiconductor giant's data center business, which sells AI-optimized chips to cloud computing companies, now produces nearly half of its revenue. For instance, this division generated $2.8 billion of AMD's $5.8 billion in Q2 sales, as data center revenue increased 115% year over year. Its AI chips for the PC market are also selling well. This segment saw Q2 sales jump by 49% year over year to $1.5 billion. However, other parts of AMD's business declined. Its chips for the gaming industry as well as its embedded products, used in industries such as automotive, experienced a cyclical downturn as customer demand in these areas waned. The gaming segment's revenue dropped 59% to $648 million compared to 2023's $1.6 billion, while embedded sales were down 41% year over year to $861 million. AMD management anticipates the embedded business will rebound in the second half of this year. This adds to AMD's AI-driven sales growth, resulting in Q3 revenue forecast to reach around $6.7 billion, a double-digit increase over 2023's $5.8 billion. While AMD provides the chips used in hardware such as computer servers, Supermicro produces the servers themselves, as well as storage solutions to house the data needed by AI to execute tasks. The central role played by Supermicro's products in the AI ecosystem is a key reason its sales skyrocketed 143% year over year to $5.3 billion in its fiscal fourth quarter, ended June 30. In fact, its Q4 revenue was more than the $5.2 billion Supermicro generated in all of 2022. The company touts its "building blocks" architecture as a competitive differentiator. Supermicro's products are modular, enabling the company to quickly create customizations to meet a customer's needs. This approach helped Supermicro grow revenue more than 5 times faster than the industry average over the past year, according to the company. Its amazing revenue growth translated into strong financials. Supermicro's net income reached $352.7 million in Q4, up from $193.6 million in fiscal 2023. This propelled its diluted earnings per share (EPS) to $5.51 in Q4 compared to $3.43 in the previous year, the latest in a multiyear history of steadily rising EPS. In addition, the company exited its 2024 fiscal year with an excellent balance sheet. Total assets were $9.9 billion versus total liabilities of $4.5 billion. Q4 cash and equivalents were $1.7 billion. Thanks to the company's success and incredible stock price rise over the past year, Supermicro announced a 10-for-1 stock split, which will take place Oct. 1. Deciding whether to invest in AMD or Supermicro is difficult. Both benefit from the tailwind of the AI market's growth, and the pair are viewed favorably by Wall Street. The consensus among Wall Street analysts is a buy rating for AMD stock with a median share price of $190. The consensus for Supermicro shares is an overweight rating with a median price of $693. Ideally, you can own both stocks. But if you had to choose just one, Supermicro edges out AMD. A key factor is valuation. Although both stocks are down from 52-week highs, Supermicro looks like the better value when evaluating them based on the price-to-earnings ratio (P/E ratio), a widely used metric to assess valuation. AMD's P/E ratio is over 6 times greater than Supermicro's P/E multiple of 25.5. And actually, AMD's shares are more expensive than those of its major rival, Nvidia, which has a P/E ratio of 61.3 at the time of this writing. Given Nvidia dominates the market for AI-optimized chips, it lends further credence to AMD shares being overpriced. Taking this into consideration with Supermicro's jaw-dropping sales growth, strong financials, steadily rising EPS, and successful product strategy, between these two AI stocks, Supermicro is the better AI investment right now.

3 No-Brainer Reasons to Buy Super Micro Computer Before Its Stock Split | The Motley Fool

Super Micro Computer's stock is a great buy after a harsh sell-off. Formerly one of the best-performing stocks in the S&P 500 index this year, Super Micro Computer (SMCI 4.89%) has been on a wild ride. The stock entered the year around $280, then reached highs of nearly $1,200 in March. After a poor reaction to its fourth-quarter earnings report, the stock is now around $500 per share. However, it won't stay that way long because management announced a 10-for-1 stock split effective Oct. 1. That will drop the price to around $50 per share (if the valuation stays around its current level). Although it's well off of its high, I think there are still three phenomenal reasons to buy the stock before its stock split. Supermicro (as it's generally known) has a lot going for it, and it's time for investors to take advantage of the tumble. Supermicro makes components and sells full-scale solutions for computing servers. While it has multiple competitors that sell servers, none have the customizability that Supermicro offers. Additionally, Supermicro's servers are some of the most energy-efficient offerings on the market, which is key to long-term sustainability, as these servers consume a lot of power over their lifespan. Supermicro is also a key supplier to many cloud computing giants, which are spending billions of dollars to bulk up their computing power. Super Micro Computer's market position is incredibly important. It has reaped the benefits of its technologies from increased sales due to the artificial intelligence (AI) race. The AI infrastructure buildout is well under way, but it has a long way to go before peaking. In fact, the company has raised its long-term revenue goal from $25 billion in annual revenue to $50 billion. Considering that Supermicro's trailing-12-month revenue is just shy of $15 billion, it has a massive runway. Because Supermicro is in its early stages, it looks like a fantastic stock to buy. Supermicro recently wrapped up a phenomenal fiscal 2024 (ended June 30) with revenue growth of 143% year over year. However, the company significantly missed earnings per share (EPS) guidance in Q4. At the end of Q3, management expected $7.62 to $8.42 in profits, but the company only delivered $6.25. While this is still strong growth (last year's Q4 saw $3.51 in EPS), a huge miss like this isn't something the market appreciates. The reason for the miss is also concerning: falling gross margins. This drop was due to "competitive pricing" (otherwise known as cutting its prices to maintain sales) and a higher initial cost to launching its new design specifically related to AI computing clusters. We'll have to see how this shakes out, but management is confident that this is only a temporary headwind. For fiscal 2025, Supermicro has expected revenue of around $28 billion, indicating around 88% growth. In Q1, that growth is expected to be even higher, coming in at around 207%. That's incredible growth and is a reason to consider buying the stock. During its peak in March, the stock was incredibly expensive. Now, it's more reasonably priced and looks good moving forward. While management didn't provide any EPS estimates for fiscal 2025, we can use the profit margin posted in Q4 and management's revenue guidance as a guide. Should Supermicro deliver $28 billion in revenue and maintain the historically low 6.6% profit margin it posted in Q4, it would produce profits of $1.85 billion in 2025. Then, I'll divide its current market capitalization ($28.8 billion) by that projected profit figure to get 15.6 times forward earnings. That's a great price for a stock, especially considering that the profit margin projection doesn't give Supermicro any credit, as management projects the gross margin pressure to be alleviated by the end of fiscal 2025 and improve steadily throughout the year. With the bottom end of the valuation projection looking attractive, I think buying Super Micro Computer's stock before the stock split makes good sense, as the company is primed for success over the next few years.

Better Artificial Intelligence (AI) Stock: Intel vs. ASML | The Motley Fool

These companies have vastly different positions in AI but could go far over the long term. There has been some pullback in artificial intelligence (AI) stocks over the last month, illustrated by a 13% dip in the Nasdaq-100 technology sector. Concerns over a potential recession triggered a sell-off that wasn't kind to tech companies. However, recent earnings from a range of tech giants active in AI suggest the industry still has much to offer over the long term. Market leaders like Advanced Micro Devices, Amazon, and Alphabet reported earnings over the last month, beating Wall Street estimates in their respective AI divisions. This impressive growth aligns with data from Grand View Research, which shows the AI market is expected to expand at a compound annual growth rate of 37% through 2030 and reach nearly $2 trillion in spending. As a result, it's likely not too late to invest in AI and profit from its long-term development. Some attractive and lesser-known options are Intel (INTC -2.69%) and ASML Holding NV (ASML 1.16%). One is investing heavily in constructing AI chip fabs and the other is a semiconductor-equipment company supplying crucial machinery for producing all kinds of chips. Let's examine these two chip giants and determine whether Intel or ASML is the better way to invest in AI. It hasn't been easy to be an Intel investor over the last 30 days, with its stock plunging 43%. On Aug. 1, the company posted disappointing second-quarter 2024 earnings, which sent stockholders running for the hills. Revenue fell by about 1% year over year, missing expectations by $150 million. Meanwhile, earnings per share of $0.02 were $0.08 less than forecasts. The earnings miss came alongside news that Intel would cut 15% of its workforce and halt its Q4 2024 dividend to reduce capital expenditures. Costly moves, such as ramping up Core Ultra PC chip production and moving its Intel 4 and 3 chip wafers to a plant in Ireland, contributed to recent declines. Meanwhile, Intel revealed its contract foundry was performing worse than expected. To make matters worse, a group of shareholders is suing Intel after some of its worst declines saw $32 billion wiped off its market value. The stockholders felt blindsided by recent earnings, accusing Intel of "materially false or misleading statements regarding the business and its manufacturing capabilities." Intel is in a tough spot. It has yet to see a return on its hefty investment in AI and is in steep competition with AMD and Nvidia. The tech giant is playing the long game and could come back strong over the long term, but investors must be willing to wait. ASML's share price has tumbled 20% amid a tech sell-off over the last month. The Dutch tech company is the world's leading supplier of lithography systems, the equipment necessary to manufacture a range of chips, including the kind used for AI. ASML is responsible for more than 80% of the lithography market, making it a crucial player in chip manufacturing and an attractive investment. The company's dominance has seen it attract all the world's biggest foundries, with some of its clients including Taiwan Semiconductor Manufacturing, Samsung, and Intel. Meanwhile, its annual revenue and operating income have consistently risen 283% and 513%, respectively, over the last decade. ASML posted its Q2 2024 earnings on July 17, with revenue of 6 billion euros falling 10% year over year. However, the company has assured investors that it sees 2024 as a "transition year with continued investments in both capacity ramp and technology." ASML expects major gains in 2025 as it benefits from its work this year. A weak point for ASML is rising tensions between the U.S. and China and its implications for the chip market. However, many of the world's top foundries are working to build factories in the U.S., which could secure ASML's business over the long term. Meanwhile, the company's monopoly over a critical area of chip development is too good to ignore. Intel and ASML have vastly different positions in AI. One is expanding in chip design and manufacturing, while the other has a monopoly on the equipment necessary to produce AI graphics processing units (GPUs). However, Intel's recent declines suggest ASML's stock might be the more reliable buy right now. Intel is under intense pressure to improve its financial situation while competing with Nvidia, AMD, and TSM. The above chart shows Intel's volatility over the last six months, with its price-to-earnings ratio (P/E) recently soaring to more than 86. The chart indicates ASML is more consistent and a better value, with a considerably lower P/E. Moreover, ASML's free cash flow of more than $3 billion, compared to Intel's negative $12 billion, only highlights ASML's more secure place in the market. This makes it the better AI stock to buy this month.