For two years, the bulls ran wild on Wall Street. These achievements can be clearly seen in the growth artificial intelligence (AI)AI isn't the only catalyst responsible for pushing broad market indices to new highs.
excessive profit in Dow Jones Industrial Average, S&P 500and Nasdaq Composite 2024 could be due to excitement over stock splits in some of Wall Street's most influential businesses.
Image source: Getty Images.
Stock splits are the proverbial tool used by publicly traded companies to equalize the share price and number of shares outstanding. These changes are superficial in the sense that they do not in any way affect the company's market value or core operations.
Since the beginning of this year, more than ten reputable companies have completed their stock split. Only one of these divisions was of the reverse typeit aims to increase the company's share price. At the same time, more than a dozen stock splits make shares of publicly traded companies cheaper at par for retail investors and/or employees who cannot afford fractional shares.
Investors tend to gravitate toward stock split companies for one main reason: consistent performance. Publicly traded companies that need to cut their stock prices to make them cheaper at face value to everyday investors are almost always superior and more innovative than their peers. In short, these are the kinds of businesses we've been hoping to do better for a long time.
Unsurprisingly, AI stock splits have been a big topic this year. Arguably the two most popular players in AI hardware. Nvidia(NASDAQ: NVDA ) and BroadcomIn June and July respectively, forward splits were performed at 1 in 10.
However, Wall Street stocks are very different as they head into the new year. Based on the forecasts of selected Wall Street analysts, the two AI-powered stock splits will grow up to 174% in 2025.
Based on one Wall Street analyst's forecast, the first stock to break even in 2025 is the configurable rack server and storage solutions specialist. Super microcomputer(NASDAQ: SMCI). Super Micro split (10-for-1) for the first time since the close of trading on September 30.
Although it's been a roller-coaster year, as I'll talk more about in a moment, Loop Capital's Ananda Baruah thinks Super Micro's stock could hit $100 a share. If Barua's prediction turns out to be correct, the stock is up 174% from its December 13 close.
The bull thesis for the Super Micro Computer is easy to understand. Nvidia's graphics processing units (GPUs) are arguably the best choice for accelerating computing in enterprise data centers, but the Super Micro has long been one of the best choices for data center infrastructure. Entrepreneurs looking to maximize their first-mover advantage are spending aggressively on the physical infrastructure necessary to do so.
In early August, Super Micro Computer reported that sales for fiscal year 2024 (ending June 30, 2024) rose 110% to nearly $15 billion. Nvidia's inclusion of high-demand GPUs in its customizable rack servers is a big reason why demand for the company's data center infrastructure has been almost insatiable.
But everything is far from perfect.
Just three weeks after Super Micro announced its full-year results, short-seller Hindenburg Research issued a report alleging "accounting fraud". Since this report was issued, Super Micro Computer has:
The filing of the annual report with the Securities and Exchange Commission has been delayed.
Accounting firm Ernst & Young, previously concerned about its internal controls, has resigned as the company's auditor.
It was the subject of a first round of accounting audits by regulators The Wall Street Journal.
Loaded from Nasdaq-100.
Recruited Evercore for potential fundraising.
Although it is expected that the independent special committee will not make any financial changes and will remain on the list. Nasdaq exchange, there is a lot One of the questions that remained unanswered until Super Micro Computer filed its annual report and the auditor signed off.
That said, Super Micro is unlikely to hit Wall Street's highest price target in the new year.
Image source: Getty Images.
Another stock that Wall Street analysts see as potentially bullish in the new year is a semiconductor wafer manufacturing equipment company. A Study of Lam(NASDAQ: LRCX). The Board of Aldermen approved the 10-for-1 split in late May (you guessed it!) after the market closed on October 2nd.
Among the more than two dozen analysts covering the company, none is more bullish than Berenberg Bank's Tammy Qiu. Qiu's $1,140 price target has been cut to $114 a share, and Lam's early October split means the semiconductor device's huge upside could be as much as 49%.
Like Super Micro Computer, Lam Research is well positioned to take advantage of the AI ​​revolution. Lam is one of the leading suppliers of wafer fabrication equipment used by semiconductor companies.
Specifically, the company's equipment packs high-bandwidth memory (HBM). HBM is responsible for accelerating computation and processing large amounts of data, which is essential for building and training large language models and running artificial intelligence solutions. Lam Research is a key cog in the infrastructure required for the mainstream adoption of AI solutions.
But like the Super Micro Computer, there is no straight line to success. Lam doesn't have to contend with the gray cloud of accounting that hangs over Super Micro, but there's another concern.
No geographical area is more important to Lama than China. In the quarter ending in June and September, the world's No. 2 economy generated 39% and 37% of its revenue. The problem is that US regulators and the incoming Donald Trump administration could complicate things.
In 2022 and 2023, US regulators restricted exports of high-performance AI chips and related equipment to China. It affects the brains behind AI data centers like Nvidia and the manufacturers behind AI data centers like Lam Research. As Trump looks to impose a 35 percent tariff on Chinese imports on the first day of his second term, Lam's top market could be a question mark.
Lam Research stock isn't cheap, either. Based on the stock trading at 22 times cash flow ending June 30, 2024, it is valued at 21% of the average trailing 12-month cash flow of the past five years.
Lam Research is likely to need US-China relations meaningful If Chiu's target price per share in 2025 reaches $114, it will improve.
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Sean Williams does not have a position in any of the mentioned stocks. The Motley Fool has and recommends positions in Lam Research and Nvidia. The Motley Fool recommends Broadcom and Nasdaq. The Motley Fool has it disclosure policy.
