Investors go wild for it Nvidia‘s (NASDAQ: NVDA) stock split.
Shares of the artificial intelligence (AI) chip leader surged 27% from the announcement of the stock split on May 22 to the execution of the split on June 7.
Those gains are enough to put Nvidia past the $3 trillion market cap mark and within a hair of becoming the world’s most valuable company. (It’s in a three-way race that’s close to Apple and Microsoft.) While Nvidia’s strong first-quarter earnings report also helped propel the stock, the stock split was the main reason for the 27% pop. Shares continued to move higher after the earnings report, and even gained another 9% in the week after the split took effect.
Now, chip stocks friends Broadcom (NASDAQ: AVGO) they are taking turns. Following Nvidia’s 10-to-1 stock split, Broadcom announced a similar 10-to-1 split when it reported fiscal second-quarter earnings after hours on June 12. Broadcom’s stock split is set to take effect on July 15.
Investors seem to like the move. Shares of Broadcom, perhaps best known for its network chips, have jumped 16% in the two days since the announcement.
Broadcom is due for a stock split
Broadcom shares are currently trading above $1,700, higher than Nvidia before the stock split. This is one of the highest share prices in the market.
In the announcement, management said the stock split was intended to “make Broadcom stock ownership more accessible to investors and employees.”
Since being bought by Avago (which took the name Broadcom) in 2016, the company has not split its shares, although the old Broadcom split three times between 1999 and 2006.
While stock price appreciation is one reason for the stock split, Broadcom’s growth potential in the age of generative AI provides another reason for the split.
Broadcom acquired virtualization software specialist VMWare late last year, and VMware has been a key driver of its growth. Revenue jumped 43% in the second quarter to $12.5 billion, ahead of estimates of $12 billion, although without VMware, revenue rose 12%.
Management also said that revenue from AI products reached $3.1 billion, representing about a quarter of total revenue. Management says demand from cloud infrastructure companies for dedicated networks and accelerators is strong. It now expects network revenue to grow 40%, compared to a previous forecast of 35%, due to AI demand. It also raised its full-year revenue guidance from $50 billion to $51 billion, $11 billion of which will be AI revenue.
Is Broadcom buying?
With or without the stock split, Broadcom looks like a smart long-term stock to own. The company has a long history of successfully integrating acquisitions and cutting costs, and it looks poised to do so again with VMware.
Meanwhile, the company may not have as much exposure to AI as Nvidia, but its competitive strengths in areas like networking and specialized ASIC chips are becoming apparent. For example, seven of the eight largest AI groups in deployment today use Broadcom Ethernet solutions.
Broadcom shares have soared in recent months so some of the growth in AI is baked into the price. But the financials also got a boost from the VMware acquisition, which significantly boosted profits.
Buying Broadcom on a stock split is not a good idea, but the split could help propel the stock higher in the coming months. As enthusiasm for AI stocks continues to grow, Broadcom deserves to benefit with the broader sector, as it clearly benefits from increasing demand for generative AI.
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Jeremy Bowman has a position at Broadcom. The Motley Fool has positions and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Jumps 27% After Stock Split Announcement. Can Broadcom Beat It? this was originally published by The Motley Fool