Day: September 21, 2024

Back in the dot-com boom era, stock splits became commonplace in response to soaring share prices. Amid the current artificial intelligence (AI) boom, a similar pattern could be developing. Already, several AI companies have split their shares, and more splits could be on the way among the others that are trading at lofty prices.

Investors should understand that stock splits don’t fundamentally change the value of a stock or the underlying business, but they usually come in the wake of significant share price appreciation, and signal management’s confidence that the stock can keep going higher.

There’s also evidence, according to a Bank of America study, that stocks outperform in the year after they split. While there’s no guarantee that any given stock-split stock will beat the S&P 500, it does offer historical evidence that the average stock-split stock does. On that note, these three AI stock-split stocks look like long-term winners.

1. Nvidia

Nvidia (NASDAQ: NVDA) needs little introduction at this point. The AI chip superstar has paced the sector, gaining roughly 700% since the start of 2023. Nvidia’s most recent stock split — a 10-for-1 split — took effect after the market closed on June 7, and the stock is down since then.

Nvidia continues to show a lot of upside potential even as its market cap is now hovering just shy of $3 trillion. The company has a huge lead in data center GPUs, the cutting-edge chips needed to power AI models like ChatGPT, and it seems likely that its lead will only get wider following the launch of chips built on its new Blackwell platform in the fourth quarter.

Additionally, the company is on pace to keep growing rapidly; revenue rose 122% year over year in its fiscal 2025 second quarter to $30 billion.

While some investors are concerned about the possibility of an AI sector bubble, there’s still plenty of evidence that demand for Nvidia’s components is soaring. The latest anecdote to support that theory: Reportedly, Oracle founder Larry Ellison and Tesla CEO Elon Musk recently took Nvidia CEO Jensen Huang to dinner so that they could beg him in person to sell their companies more GPUs.

Given its entrenched competitive advantages, surging demand for its wares, and a long development path ahead in generative AI, Nvidia still looks like a smart buy.

2. Super Micro Computer

Super Micro Computer (NASDAQ: SMCI) is another breakout AI stock. Like Nvidia, its revenue has soared, up 144% in its most recent quarter to $5.31 billion. However, the company’s gross margin declined, weighing on profits, and the market bid the stock downward.

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Later, Supermicro shares plunged after a short-seller attacked the company, and management said its annual 10-K would be delayed. CEO Charles Liang responded to the short-seller’s charges, saying that business remains strong. Importantly, he also said that despite the filing delay, the company doesn’t anticipate any material changes to its financial results from what it previously reported.

Supermicro is known for manufacturing high-density servers that perform especially well in AI applications, and it’s dominating the market for liquid-cooled AI servers, giving it a competitive advantage.

A great reason to buy the stock now is Supermicro’s valuation. It currently trades at a price-to-earnings ratio of just 22, which looks like a dramatic undervaluation, assuming neither of those two issues is material.

Supermicro’s 10-for-1 stock split is scheduled for Oct. 1. That event could be a catalyst for the stock’s rebound.

3. Broadcom

Broadcom‘s (NASDAQ: AVGO) business is diversified across cybersecurity, virtualization software, semiconductors, and networking infrastructure. It doesn’t have the same level of exposure to AI that Nvidia and Supermicro do, but it’s seeing growing demand due to the new technology thanks in part to its switches, networking solutions, and custom accelerators for AI data centers.

CEO Hock Tan said he expected the company’s revenue from AI to reach $12 billion this year — roughly a quarter of its total sales.

The tech giant also has a long track record of success in growing its business both organically and through acquisitions, in which it typically cuts costs to drive profits higher. In its most recent fiscal quarter, the company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $8.2 billion. That amounted to 63% of its total revenue, a ratio that’s nearly as good as Nvidia’s.

Broadcom executed a 10-for-1 stock split on July 12, and its stock has edged down since then along with the rest of the AI sector. Currently, Broadcom trades at a price-to-earnings ratio of 37, a reasonable level for an AI leader whose profitability should improve as it completes the integration of its massive VMware acquisition.

All three of these AI stocks have delivered strong results and look poised to continue doing so. With strong competitive advantages, huge growth opportunities, and affordable valuations, they all look like smart long-term buys.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Bank of America and Broadcom. The Motley Fool has positions in and recommends Bank of America, Nvidia, Oracle, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

3 Artificial Intelligence (AI) Stock-Split Stocks That Could Help Set You Up for Life was originally published by The Motley Fool

• A millennial couple grew their net worth to over $700,000 from $150,000 in 2018.

• Living abroad and only spending one of their incomes, which is $50,000, helped boost their finances.

• Brian Davis shared why his goal isn’t to retire early but to pursue his dream work.

About two decades ago, before he’d ever heard of the FIRE movement, Brian Davis decided to pursue financial independence and an early retirement.

He began investing his savings in rental properties, thinking that if he owned enough of them, he’d eventually be able to live off the rental income alone, the 43-year-old told Business Insider via email.

But this didn’t go according to plan. He hated being a landlord, and some of the investments proved to be less profitable than he’d expected. The idea of retiring ahead of schedule seemed like it could be out of reach, so he decided to explore other options. Today, he runs a digital real estate investing platform.

However, in the years since, a lot has changed for Davis — both from a financial and philosophical perspective. For one, he’s grown his net worth to more than $700,000 as of May from roughly $150,000 in 2018, according to documents viewed by BI.

Davis and his wife have aimed to live entirely off of his wife’s roughly $50,000 a year school counselor salary while saving and investing all of his income, which comes primarily from a real estate business he cofounded in 2016 — he said their annual household income is around $150,000. This saving strategy has been key to boosting their finances.

Davis’s financial goals have also evolved. After learning more about the FIRE movement — a financial lifestyle aimed at saving enough to become financially independent and retire before the traditional retirement age — Davis said he discovered that most people who managed to retire early eventually got bored of “sipping margaritas on the beach” and returned to work in some form. Rather than early retirement, Davis said his current goal is to live his ideal life, and he thinks remaining in the workforce can help him accomplish this.

“I have no plans to retire, but I do hope to reach financial independence within the next five years,” he said. “The less you worry about money, the more your work opens up to be fun, creative, and without limits on opportunities.”

While many Americans are having trouble saving for retirement, some are putting themselves in a position to stop working ahead of schedule through various savings and investment strategies. However, not all of these people are aiming for an early retirement. Some people, like Davis, want to continue working as they pursue financial security. But not just any kind of work: They want to spend their time on work that they enjoy or find fulfilling.

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Davis shared how he’s grown his net worth — and why he thinks finding one’s dream work can help them live their ideal life.

Lower living expenses can make it easier to save

Davis and his family, including his wife Katie and their daughter, have a huge financial advantage: They don’t pay for housing.

This is among the perks of Katie’s job: She works as a school counselor at international schools around the world. Davis said they first moved abroad in 2015, spending four years in Abu Dhabi and four years in Brazil before moving to Lima, Peru about a year ago. Davis said it’s not unusual for international schools to provide free housing for faculty and staff.

In addition to saving money on housing, they’ve been able to take advantage of the “lower cost of living overseas,” including cheaper food and healthcare costs. Davis said this was among the main reasons they decided to venture abroad.

“You can buy beef and pork in South America for a quarter of the cost in the US,” he said.

Davis said another big way he’s been able to save money is by avoiding car ownership — he said he hasn’t owned a car in five years.

“People don’t realize how much more cars cost than just the monthly payment,” he said. “Without a car, we don’t have to pay for car insurance, repairs and maintenance, gas, parking.”

The family’s reduced living expenses have enabled them to live entirely on Katie’s salary. However, Davis said that they don’t expect to have these financial perks forever, so they’re trying to take advantage of them now.

“At some point, we know we’ll have to move back to the US for family reasons,” Davis said. “So we’re trying to build our net worth and passive income streams as quickly as possible before we do.”

How pursuing dream work can help one live their ideal life

When Davis learned that many early retirees return to work in some form, he said this revelation was in some ways disappointing.

However, he’s since changed his tune. For example, if a person retires at age 60 — rather than age 50 — then it would be much easier for them to hit their retirement savings goal.

“It means that you don’t need nearly as much money as you thought you did,” Davis said. “If you’re going to keep doing some kind of work on your own terms, you’ll keep earning active income.”

However, that extra decade of work might not be satisfactory for everyone. That’s why Davis thinks the key is finding one’s dream work.

Davis said if someone is doing work they enjoy, then they likely won’t be so desperate to give up work and retire. And even if this means transitioning to work that’s lower-paying than one’s old job, Davis said this is where the savings strategies well-discussed in the FIRE community can come in handy: They can help bridge the gap between one’s desired and actual income.

“You just need enough money to cover any shortfall between what you want to spend and what your dream work pays,” he said. “In other words, you can start living your ideal life now, or very soon, without being financially independent.”

To be sure, finding a job — forget about one’s dream job — is easier said than done in today’s economy. Many Americans are having a harder time finding work as companies pull back on hiring.

For Davis, his business is one component of his dream work. He said he gets all the benefits of real estate investment without the headaches of being a landlord.

“I don’t consider myself financially independent, but I’m living the same life that I would be if I were,” he said. “I get to do work I love, on my own schedule, from anywhere in the world.”

His top advice for people is to envision their ideal lifestyle and determine what type of work and income level they need to make it a reality.

“Once you reframe FIRE in those terms, it gets both easier and more fulfilling, rather than just dreaming about sitting on a beach as a bum for the rest of your life,” he said.

Have your savings and wealth grown significantly in recent years? Are you willing to share your top financial strategies? Reach out to this reporter at jzinkula@businessinsider.com.

Read the original article on Business Insider

Trump Media & Technology (DJT) fell Friday to a record low, as selling restrictions on former President Donald Trump and other insiders ended.

On Sept. 13, Donald Trump posted on Trump Media’s Truth Social that he wouldn’t sell DJT stock when the lockup expired. That lifted shares by 12% that day, but the selling quickly resumed. Trump owns a majority of DJT stock.

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DJT Stock

Trump Media stock plunged 8% to 13.52, hitting a record low. Shares dived 24.6% for the week.

DJT stock began trading on March 26, as Trump Media came public via a SPAC merger with Digital World Acquisition. Even including the pre-SPAC DWAC trading, Trump Media set its lowest price in more than a year.

Trump Media has scant revenue, reporting roughly $800,000 in each of the last three quarters, along with ongoing losses.

DJT stock has traded at times as a sentiment indicator about Donald Trump’s political campaign.

DJT stock hit a recent high of 46.27 on July 12, just after the first Trump assassination attempt, with the former president showing a commanding lead over President Biden, who later dropped out in favor of Vice President Kamala Harris.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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Here’s How Much Stocks Historically Rise On The First Fed Rate Cut.

Market Sends Clear Message; Three Magnificent 7 Stocks In Buy Areas

• BMO’s Brian Belski raised his S&P 500 price target to 6,100, signaling 7% upside by year-end.

• The Fed’s rate cut and favorable seasonal data support the bullish stance.

• Belski cites broadening market gains and a likely soft landing for the US economy as key factors to watch.

Brian Belski of BMO has taken the spot as the most bullish equity strategist on Wall Street.

In a note on Thursday, Belski raised his S&P 500 price target for 2024 to 6,100, representing potential upside of 7% over the next three months.

Belski’s prior 2024 price target for the S&P 500 was 5,600.

A combination of factors, including the Federal Reserve’s 50 basis point interest rate cut on Wednesday, was enough to make Belski even more bullish on stocks.

“Much like our last target increase in May, we continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” Belski said.

Belski said favorable seasonal data suggests the stock market will finish the year strong in the fourth quarter, “especially since the Fed has shifted to easing mode.”

Since 1950, there have been eight years when the S&P 500 was higher by about 15% to 20% in the first nine months of the year.

According to Belski, in those years, the S&P 500 saw an average fourth quarter return of about 6%, which is about 50% higher than the average fourth quarter return for all years.

Belski also finds it encouraging that recent stock market gains have not been concentrated in just the mega-cap technology stocks.

Instead, the stock market rally has been broadening out to other sectors and smaller-sized companies.

“This is a trend we expect to continue and should help to support future market gains even if the price and fundamental performance of Mag-X stocks continues to decelerate in the months ahead,” Belski explained.

Finally, with the increased likelihood of a soft landing in the US economy, Belski said that elevated valuations are justified.

Based on Belski’s 6,100 price target, that implies a price-to-earnings ratio of 24.4x, which is above historical averages.

“We continue to believe a soft landing is the most likely economic scenario which makes the current environment most comparable to the mid-1990s – a period where the index was able to sustain a greater-than 20x multiple for several years,” Belski said.

Read the original article on Business Insider