July 17, 2024

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Which Soaring Stock-Split AI Stock Is The Better Buy Now?

2 min read

Since the launch of OpenAI’s ChatGPT in late 2022, generative artificial intelligence (AI) has taken the technology world by storm. Few companies have benefited more than hardware giants like Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO), which supply the data center equipment needed to support this fast-growing industry.

Business is booming, and both companies have turned to stock splits to keep their shares liquid and available to smaller investors. Let’s explore the long-term prospects of both companies while acknowledging the potential challenges they may face in the near term.

Nervous man watching his stocks on the computer

Image source: Getty Images.

Nvidia

After seeing its shares rise over 3,500% in just five years, it’s no surprise that Nvidia relies on frequent stock splits to keep its share price under control. The most recent was a 10-for-1 split, effective as of June 7, that brought its stock to around $120 per share. And with the artificial intelligence industry in its early innings, Nvidia is still a long-term winner.

There is no shortage of grandiose projections for the future of AI. Bloomberg Intelligence believes the industry could be worth a whopping $1.3 trillion by 2032. And with an 80% market share in the advanced graphics processing units (GPUs) needed to power the large language models, Nvidia undeniably has a bright future from a demand perspective.

With a forward price-to-earnings (P/E) multiple of 51, Nvidia’s shares are also fairly valued relative to growth. First-quarter revenue increased 262% year over year to $26 billion while net income surged 628% to $14.9 billion.

That said, every new industry experiences growing pains. And with 87% of Nvidia’s sales coming from data center hardware, the company is exceptionally vulnerable to any near-term slowdown in AI chip demand, even if its long-term future remains bright.

Broadcom

With an unusually high stock price of $1,735 per share, Broadcom seemed overdue for a split when it announced a 10-for-1 swap expected to go live on July 15. Like…



2024-06-20 07:00:00

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