In recent years, Wall Street has witnessed a surge in the popularity of stock-split stocks, particularly in the technology sector. These stock splits, although not changing the company’s market value, carry emotional significance. If you’re looking to invest in some high-quality artificial intelligence (AI) stocks that may benefit from a potential stock split, there are two stocks worth considering.
One of these stocks is Broadcom (NASDAQ: AVGO), a prominent semiconductor designer and enterprise software-solutions player. In 2023, Broadcom’s share price has soared by nearly 105%, reaching roughly $1,130. Given this impressive growth, management may choose to split the stock to make it more accessible to a broader investor base. However, the reasonable share price is not the only reason to consider investing in Broadcom. The company also boasts solid fundamentals and stellar financials.
In fiscal 2023, Broadcom reported impressive financial performance. While revenues grew by 8% year over year to $35.8 billion, net income jumped by 22.5% to $14.1 billion. The company’s free cash flow also rose by 8.1% to $17.6 billion, with a solid FCF margin of 49%.
Broadcom has emerged as a major beneficiary of the increasing demand for customized AI accelerators and ethernet-networking solutions from cloud-service providers. With a focus on becoming a major player in the software segment, Broadcom acquired VMware, a leading provider of virtualization-software technology. The company has guided for $12 billion of VMware revenues in fiscal 2024.
Meanwhile, ServiceNow (NYSE: NOW), a leading IT management and business process-automation player, is another AI stock worth considering. With shares up roughly 80% in 2023 and priced at about $700, management may also consider splitting the stock to attract small investors. ServiceNow’s Now Platform enables enterprises to streamline their technology, employee and customer experiences, and creator workflows, which has been particularly beneficial amid cost-cutting measures by large enterprises during the year.
ServiceNow has impressive financial performance, with subscription revenues increasing by 24.5% year over year to $2.2 billion in the third quarter of fiscal 2023. The company’s high customer-renewal rate of 98% in the past five quarters, as well as its broad customer base of more than 7,700 enterprises (including 85% of the Fortune 500 companies), demonstrate its ability to maintain a solid business.
Additionally, ServiceNow’s generative AI-driven platforms, in collaboration with Nvidia, are helping clients improve workflow productivity through faster and smarter automation.
While ServiceNow trades at a higher price-to-sales (P/S) ratio of 17.1 compared to the software-industry median of 2.2, the company’s solid financials, sticky customer base, and generative AI capabilities justify the premium valuation.
In conclusion, if you’re looking to invest in AI stocks that may benefit from potential stock splits, consider buying shares of Broadcom and ServiceNow. These stocks offer not only the potential for more affordable prices but also solid fundamentals and promising growth in the AI sector. With compelling financial performance and strong market positions, both companies are well-positioned to capitalize on the continued demand for AI technologies.
Sources:
– Broadcom (AVGO) – The Motley Fool
– ServiceNow (NOW) – The Motley Fool
