Sunday, February 25, 2024

Splitsville: 2 Red-Hot AI Stocks That Just Did Stock Splits — Buy Before They Surge Again

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Stock splits don’t fundamentally change a company, but they often precede steep share price gains. With AI growth exploding, recently split Nvidia and Amazon stocks offer exciting opportunities.

This in-depth guide reveals why these two AI infrastructure leaders could hand investors 5X returns or better in the coming years.

Table of Contents

  • Intro: Why Stock Splits Signal Growth Ahead
  • Nvidia: The AI Compute King
  • Amazon: Cloud Leader Chasing AI Supremacy
  • Splitsville Takeaway: AI Means Everything
  • FAQ: Understanding Stock Splits

Intro: Why Stock Splits Signal Growth Ahead

When a company does a stock split, it multiplies its total shares outstanding to reduce the share price. Splits make stocks more accessible to smaller investors and are seen as signals of strength.

With AI growth skyrocketing after ChatGPT, two recent split stocks — Nvidia and Amazon — look poised for massive gains. Here’s why their pivots into artificial intelligence could drive 5X returns or better long-term.

Nvidia: The AI Compute King

Nvidia provides the hardcore processing power AI models need for training and inference. The company’s gaming GPUs are also top-notch.

After gaining over 100X since its 1999 IPO, Nvidia has split its stock 5 times to keep shares affordable. The most recent 4:1 split occurred in July 2021.

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But thanks to its AI leadership, Nvidia still trades at a rich 47 P/E. Why so expensive? A few reasons:

Moat Protection — Nvidia’s new H100 GPU performs 9X faster than previous models. The extreme speed helps its customers stay ahead.
Generative AI Demand — ChatGPT used 10,000 Nvidia chips for training. As AI goes mainstream, demand for elite GPUs will soar.
Revenue Growth — Nvidia’s data center revenue jumped by over 61% last quarter. Its upcoming consumer GPUs will also boost gaming sales.
Nvidia is the clear AI compute leader. As investment ramps up, no other provider matches its scale and performance.

And with a 101% YoY revenue increase last quarter, Nvidia has demonstrated it can rapidly capitalize on AI opportunities. More parabolic growth lies ahead.

Amazon: Cloud Leader Chasing AI Supremacy

Like Nvidia, Amazon completed a 20:1 stock split in 2022 to make shares more accessible. Trading at a 41 P/E, the company looks reasonably priced given its growth initiatives.

While Amazon’s core online retail segment faces macro headwinds, its cloud computing division Amazon Web Services (AWS) is thriving. And management is ramping AI innovation on AWS to extend its cloud dominance.

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Key moves include:

Bedrock Platform — Allows AWS customers to easily build custom AI apps without complexity.
AI Chip Development — Custom silicon lowers model training costs, keeps clients locked in.
AI Talent Hiring — Amazon seeks to lead in research and implementation expertise.
Like Nvidia, Amazon is attacking AI infrastructure from multiple angles. AI workloads will drive AWS growth higher as more businesses adopt advanced analytics and automation.

And doubling of net income last quarter shows Amazon’s profit engine kicking into high gear. The company generates substantial cash flows to fund future innovation.

Splitsville Takeaway: AI Means Everything

For stocks like Nvidia and Amazon with strong competitive positioning in artificial intelligence, splits create buying opportunities.

Their AI infrastructure empires help Ensure the technology revolutionizes every industry. Patient investors could easily see 5–10X returns over the next decade.

But Amazon looks a bit safer than Nvidia currently thanks to its diversified businesses and surging profits. Its growth drivers are also more durable and varied than Nvidia’s reliance on AI compute dominance.

Of course, timing is everything with stocks after splits. Dollar cost averaging over months or years smooths out volatility. And the recent tech selloff provides attractive entry points.

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For investors who missed these AI giants pre-split, the current discounted prices offer a rare second chance before they leave splitsville in the rearview mirror.

FAQ: Understanding Stock Splits

What is a stock split?

A stock split increases the number of a company’s total shares outstanding while reducing the share price proportionately. For example, a 2:1 split doubles shares outstanding and cuts the price in half.

Why do stock splits happen?

Splits make stocks more accessible to smaller investors and increase liquidity. High-growth companies will often split to keep share prices in a reasonable range.

Do stock splits increase value?

Splits don’t change market capitalization — the total value of all shares. But they are often positive signals from management and precede additional gains.

Should I buy stocks that just split?

If the underlying company has strong competitive advantages in a growing industry, post-split weakness can offer good entry points. AI leaders like Nvidia and Amazon check these boxes.

How much higher can these AI stocks go?

Nvidia and Amazon could realistically gain 500% or more over the next 5–10 years. Rapid AI adoption will fuel huge revenue and profit growth for companies uniquely positioned as picks-and-shovels providers.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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