Unquestionably, the allure of artificial intelligence (AI) has cast its spell over investors, yet the spectacle of stock splits has established a firm grip on Wall Street. A stock split, an ostentatious event in the life of a publicly traded entity, offers a facelift to its share price and outstanding share count without any material impact on the company’s market worth or operational prowess.
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The Fascination with Nvidia’s Recent Stock Split
In the realm of high-profile stock splits in 2024, Nvidia’s extraordinary journey captured the limelight. The AI powerhouse, since its IPO back in January 1999, has orchestrated six forward splits. The most recent, a monumental 10-for-1 stock split announced by the board on May 22, swiftly took effect on June 7, transforming Nvidia’s lofty share price of over $1200 into a modest north of $120 range.
An AI marvel like Nvidia found itself necessitating its most expansive stock split yet due to its unassailable dominance in the AI space.
Since the onset of 2023, Nvidia’s AI-centric graphics processing units (GPUs) have emerged as the undisputed benchmark in high-compute data centers. With a firm grip on the AI-GPUs dispatched for deployment in enterprise data centers last year, Nvidia enjoys a virtual hegemony. The insatiable appetite for the company’s H100 GPU has outstripped supply, propelling Nvidia to escalate selling prices and fortify its adjusted gross margin.
Continuing on the ascendancy, Nvidia is poised to maintain its first-mover edge. While competitors scurry to catch up to the H100, Nvidia gears up to unveil its cutting-edge AI-GPU architecture, Blackwell, catering to quantum computing, generative AI solutions, engineering simulation, and beyond. CEO Jensen Huang tantalizingly hinted at the introduction of its Rubin GPU architecture by 2026.
Nvidia’s trailblazing 10-for-1 stock split has paved the way for other fast-growing, market-dominant enterprises to consider following suit. Intriguingly, two members of the illustrious “Magnificent Seven” seem poised to heed the call.
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Potential Candidates in the Wake of Nvidia’s Move
To refresh memories, the revered “Magnificent Seven” embodies the largest and most formidable corporations in the United States. Microsoft, Apple, and Nvidia lord over the $3 trillion market cap domain, with Alphabet and Amazon not far behind at over $2 trillion. Meta hovers near $1.4 trillion, and though Tesla currently flirts below $1 trillion, it has previously crossed this symbolic threshold.
Among the cohorts in Nvidia’s elite league, two appear ripe to embrace the momentum of stock splits.
The Potential Game-Changers:
The first contender, Meta Platforms, the only one yet to undergo a split, stands out as a compelling candidate. Since its inception in 2012, Meta’s stocks have soared by over 1,300%, with prices hovering around $540 as of the closing bell on July 5.
While Meta basks in the AI-driven glory, it could indeed be time for this social media giant to consider taking the monumental leap towards a transformative stock split.
The Magnificent Seven: A Deep Dive into Tech Giants of Wall Street
Meta Platforms: A Giants’ Cash Stash Under AI Pressure
When Martha “Meta” Platforms dances, all eyes are on her. As the parent company of the widely-cherished Facebook, Instagram, WhatsApp, and other social media powerhouses, she lords over a staggering 3.24 billion loyal followers as of the last quarter. Meta’s ace card? An advertising revenue empire that nearly monopolizes her sales, yielding an eye-watering 98% from ad placements on her popular social media territories.
Beneath her radiant surface lies a well-buried treasure chest boasting more than $58 billion in cash reserves and marketable securities as of this year’s first quarter. CEO Mark Zuckerberg, the wizard behind the curtain, benefits from a bottomless well of cash flow exceeding $76 billion over the trailing 12 months. With ample resources to play with, Zuckerberg is swiftly steering Meta towards AI data centers and the metaverse, setting the stage for the company’s cash cow to potentially undergo its very first stock split, signifying expanding prospects and blooming growth.
Microsoft: A Stock Split Stalwart Ready to Soar
Microsoft, another powerhouse of the seven, is boldly revving up for its next stock split chapter after a lengthy sabbatical since its last split in February 2003. Dabbling in its ninth forward split since its IPO back in March 1986, this market giant is teasing investors with prospects of an imminent stock break-up, closing recent sessions at $467.56 per share. Microsoft’s sturdy framework leans on ripe margins from its established segments to fuel its seeds of growth. The timeless footholds of Windows and Office continue to be Microsoft’s breadwinners, channeling ample funds into high-growth sectors like the cloud and AI. Azure, the company’s cloud champion, stands out as a key contender in Microsoft’s arsenal, edging towards the top with a robust 31% sales growth in the fiscal third quarter alone.
Emulating Meta, Microsoft flaunts a resilient balance sheet, boasting $80 billion in liquid assets and short-term investments as of the third fiscal quarter’s close, backed by an impressive $110 billion in operating cash flow over the trailing 12-month period. Microsoft’s past acquisition of gaming behemoth Activision Blizzard for a whopping $68.7 billion in cold hard cash showcases the company’s appetite for strategic growth investments, setting the scene for Microsoft to mark its place among the Magnificent Seven with an enticing display of a prospective stock split.
Riding the Nvidia High: A Cautionary Tale
Amidst the golden triumvirate of tech juggernauts stands Nvidia, a tale of caution swept up in the whispering winds of stock investing. The allure of Nvidia’s star-studded trajectory, soaring past financial milestones with jaw-dropping returns, tempts many a hopeful investor. However, the skeptic’s voice whispers warnings of prudence, hinting at overlooked alternatives amidst Nvidia’s shine. The Motley Fool Stock Advisor team pointedly steers investors away from Nvidia, unveiling a treasury of ten hand-picked stocks poised to yield monstrous returns in the coming years — stocks that glitter brighter than the Nvidia star. As the sonorous chime of hindsight echoes, reflecting on Nvidia’s past glory, one recounts the fateful year of 2005 when a mere $1,000 in Nvidia stocks would have blossomed into a staggering $785,556, an overlooked opportunity that slipped through the fingers of many.