2 Potential Artificial Intelligence (AI) Stock-Splits Investors Could Consider
High-quality companies tend to create tremendous amounts of value, which sometimes drives their per-share price into the hundreds (or even thousands) of dollars. It can be too expensive for small investors to buy in at that price point (unless they use a broker that offers fractional shares), which leaves institutional investors and large funds holding a dominant piece of the pie.
A stock split can ease that problem by increasing the amount of shares in circulation while, at the same time, organically reducing the price per share. Stock splits are entirely cosmetic and don't change the value of the underlying company, but they make the stock more accessible to smaller retail investors.
Several high-profile companies executed stock splits this year:
- Nvidia completed a 10-for-1 stock split on June 10.
- Chipotle completed a 50-for-1 stock split on June 26.
-
Broadcom completed a 10-for-1 stock split on July 12.
Potential Future Stock Splits
A new year is right around the corner and that has some analysts prognosticating on who might execute stock splits in 2025. Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) could find their way onto the list. Out of the six technology companies with valuations of $1 trillion or more, those two have the highest per-share prices. They could get even more pricey as they expand their presence in the artificial intelligence (AI) industry. Here's why they could each benefit from a split:
Microsoft
Microsoft has completed nine splits since its stock came public in 1986. The company has created a staggering $3 trillion in value for investors over the last 38 years. Microsoft's most recent split was more than two decades ago in 2003. The company's stock is trading at $415 as of this writing, so it might be due for another in the near future -- especially because of the potential value the company stands to create thanks to its investments in AI.
Microsoft is a key investor in ChatGPT creator OpenAI and has used the start-up's technology to create the Copilot virtual assistant. Microsoft Azure, one of the largest providers of cloud services in the world, could be a key source of stock-price appreciation in the years ahead. If Microsoft executes a 3-for-1 split, its stock will come down to $138 per share, making it more accessible for smaller investors.
Meta Platforms
Meta Platforms has never done a stock split, but considering its stock price of $554, a split could be on the horizon. The company generates most of its revenue from selling advertising slots to businesses, and its AI algorithms help in increasing user engagement across its platforms.
Meta AI, powered by Llama, an LLM built in-house, is on its way to becoming one of the company's most popular products. Meta stock trades at a forward price-to-earnings ratio (P/E) of 21.9, indicating potential for stock-price appreciation in the future.
Before investing in these companies, consider the potential impact of stock splits on your investment strategy.
