Currently, Wall Street is caught in a fervor over two major paradigms: the artificial intelligence (AI) sector and the phenomenon of stock splits. What many might fail to recognize is that these trends are converging in the realm of a select trio of companies.

Stock splits are a strategic tool that publicly traded companies exercise to adjust their share price and outstanding share count. It’s crucial to note that these adjustments are purely cosmetic, with no impact on a company’s market capitalization or fundamental operational performance.

While stock splits come in two types – forward (reducing nominal share price) and reverse (increasing nominal share price) – the majority of investors gravitate towards companies executing forward splits. Typically, businesses conducting forward splits are industry leaders displaying operational excellence and innovation, a characteristic seldom found in companies resorting to reverse splits.

Over the past six months, 13 prominent companies have either announced or completed a stock split, with all but one opting for the forward-split format. Among these, three companies stand out as pioneers in the artificial intelligence landscape.

Image source: Getty Images.

Revolutionary Stock Splits by Nvidia, Broadcom, and Super Micro Computer

The excitement surrounding the AI surge is palpable. According to PwC analysts, AI is poised to contribute $15.7 trillion to the global economy by the end of the decade, suggesting numerous potential winners due to this technological breakthrough.

Leading the pack, on May 22, hardware behemoth Nvidia (NASDAQ: NVDA) initiated a monumental 10-for-1 forward split – its largest in history. Following the split’s completion on June 7, Nvidia soared to a market cap of $3.46 trillion, briefly holding the title of the most valuable publicly traded entity.

Nvidia’s H100 graphics processing unit (GPU) has become the gold standard in enterprise data centers focused on training large language models (LLMs) and running generative AI solutions. Enjoying a near-monopoly in AI-accelerated data center processors, combined with robust pricing power from AI-GPU scarcity, Nvidia’s stock has seen significant growth.

Next in line, AI networking specialist Broadcom (NASDAQ: AVGO) approved its inaugural 10-for-1 split on June 12, showcasing solutions like the Jericho3-AI fabric renowned for optimizing AI-GPU connectivity in data centers, thus enhancing real-time AI-driven operations.

Finally, Super Micro Computer (NASDAQ: SMCI), a provider of bespoke rack servers and storage solutions, joined the fray with its first-ever 10-for-1 stock split announcement on August 6. Its server systems are in high demand as businesses construct the essential infrastructure for various cutting-edge technologies.

Super Micro’s robust sales performance reflects its pivotal role in supporting the growth of AI initiatives, including LLM training, generative AI applications, quantum computing acceleration, and more. With analysts anticipating substantial sales growth, Super Micro is well-positioned for the current fiscal year.

The Cautionary Tale: Two of the Three AI Stock-Split Companies Don’t Make the Cut

Despite the enthusiasm surrounding stock-split phenomena, not every premier player in the AI landscape warrants investment.

History underscores the inherent risks associated with hyped innovations. Over the past three decades, every trend that captivated investors with lofty promises eventually succumbed to the pitfalls of early-stage bubbles.

Wall Street often falls victim to the allure of groundbreaking technologies, overestimating the pace of adoption and failing to appreciate the requisite maturation period these advancements demand.