AI-driven interest in stock splits for 2024, but concerns over competition and valuation overshadow potential opportunities

From Nasdaq

July 17, 2024 05:06 am:

The AI revolution on Wall Street is driving interest in stock splits in 2024. Companies enact stock splits to change share price and outstanding share count without affecting market cap or performance. Forward splits make shares more affordable, while reverse splits aim to increase share price for exchange standards. 12 high-profile businesses have announced stock splits this year, offering potential opportunities for investors.

Nvidia, a hardware leader in AI revolution, enacted a 10-for-1 forward stock split in June. Despite its strong performance in AI-accelerated data centers, competition and valuation concerns loom. Competitors like Intel and AMD pose challenges, and Nvidia’s valuation, with a price-to-sales ratio of 40x, is reminiscent of past bubbles, making it a risky stock to consider.

MicroStrategy, known for holding the most Bitcoin, announced a 10-for-1 forward stock split in July. While its Bitcoin holdings are substantial, Bitcoin’s limitations in payments and real-world use cases, combined with a premium stock valuation, make it a risky investment. In addition, financing Bitcoin holdings with convertible debt adds risk in a bear market.

Chipotle Mexican Grill’s historic 50-for-1 stock split in June highlights its innovative approach in the fast-casual restaurant industry. Factors like using responsibly raised meats, “Chipotlanes” for mobile orders, and limited menu choices have contributed to its success. However, with a high valuation and concerns about organic growth rates, investors should approach Chipotle with caution.

Read more at Nasdaq: 3 Premier Stock-Split Stocks I Wouldn’t Touch With a 10-Foot Pole in the Second Half of 2024