Wall Street’s Bull Market: The Impact of Stock Splits and AI on Leading Companies in 2024

As the two-year anniversary of Wall Street’s bull market approaches, the excitement around artificial intelligence (AI) cannot be understated. Yet, it’s equally important to recognize how euphoria over stock splits has contributed to the ascendance of select market leaders in 2024.

Stock splits serve as a strategy for publicly traded companies to modify their share price and outstanding shares without impacting their market capitalization or operational performance. These adjustments, while aesthetic, can influence investor perception and accessibility.

Image source: Getty Images.

There are two types of stock splits: forward and reverse. Generally, investors favor forward splits, which lower a company’s share price, making it more accessible. In contrast, reverse splits, meant to elevate share prices, often indicate a struggling company and are typically avoided by investors. Recently, several well-known companies have engaged in stock splits, yet their future projections vary significantly according to Wall Street’s analysts.

Currently, three leading stock-split stocks hint at potential gains of up to 111%.

Nvidia: Implied Upside of 45%

Leading the charge is Nvidia (NASDAQ: NVDA), a titan in the AI space. In June, Nvidia executed a forward split of 10-for-1, which came as no surprise given its pivotal role in AI technology.

According to analyst Hans Mosesmann from Rosenblatt Securities, Nvidia’s stock could reach $200 per share, representing a 45% increase from its closing price on October 14. This projection would elevate Nvidia’s market capitalization to approximately $5 trillion.

Nvidia’s stock has surged as its hardware powers AI-enhanced data centers. The demand for its H100 GPU has soared, with prices commanding 100% to 300% more than competitors, thereby boosting the company’s adjusted gross margins.

Nvidia’s competitive edge is reinforced by its CUDA software platform, which fosters loyalty among developers. However, there are concerns about sustainability. History shows that groundbreaking innovations often face bubbles, and Nvidia’s major clients are now beginning to develop their own AI-GPUs, potentially limiting Nvidia’s future orders.

Image source: Sirius XM.

Sirius XM Holdings: Implied Upside of 60%

Another stock-split candidate that may see substantial growth is Sirius XM Holdings (NASDAQ: SIRI). This satellite-radio operator recently executed a reverse split of 1-for-10.

Benchmark analyst Matthew Harrigan projects that Sirius XM could reach $43 per share, indicating a potential 60% gain from its closing price on October 14.

Despite experiencing subscriber losses over the past two quarters primarily due to weak auto sales, Sirius XM possesses distinct advantages. Notably, it operates as the sole licensed satellite-radio provider, ensuring considerable pricing power.

Sirius XM’s diverse revenue model also sets it apart. Unlike traditional radio operations that rely heavily on advertising, Sirius XM garners roughly 77% of its revenue from subscriptions. This business model provides stable cash flow, protecting the company from revenue swings during economic downturns.

Additionally, its stock trades at a low valuation of around 8 times forward earnings, presenting an attractive opportunity for investors seeking long-term growth.

Super Micro Computer: Implied Upside of 111%

Finally, the stock with the strongest growth potential appears to be Super Micro Computer (NASDAQ: SMCI), a provider of customized server solutions. After a 10-for-1 forward split on September 30, expectations for growth surged.

Analyst Ananda Baruah from Loop Capital has set a target of $100, which reflects an impressive 111% upside from its post-split price.

Super Micro plays a critical role within the booming data-center ecosystem, providing servers that integrate Nvidia’s high-demand GPU technology. The company stands to benefit from increasing demand given the growing need for AI-computing technology.

Overall, the performance of stock-split companies like Nvidia, Sirius XM, and Super Micro underlines the interplay between market sentiment, technological advancements, and investor interests in 2024. As these companies navigate unpredictable financial landscapes, their prospects remain closely monitored by analysts.