Investors in the AI sector have seen three major players announce stock splits recently: Nvidia, Broadcom, and Lam Research. While the splits may make buying shares more accessible, they do not change the fundamental value of the companies. Nvidia has already executed its split, while Broadcom and Lam Research are scheduled to split their shares in the near future.
Nvidia has been a leader in GPUs and software for data processing, while Broadcom specializes in networking chips and AI accelerators for cloud companies. Lam Research is a key player in semiconductor equipment manufacturing, crucial for the production of Nvidia and Broadcom chips.
In terms of valuation, all three stocks have seen significant growth in the past 18 months as the AI industry has boomed. Nvidia has the highest forward P/E ratio and expected growth rate, making it potentially the cheapest among the three post-split stocks. However, the uncertainty of future growth rates and risks in the AI industry must be considered.
While Nvidia’s growth has been impressive, there are risks involved, such as intense competition and potential slowdowns in AI spending. Broadcom and Lam Research, on the other hand, may see growth in the future as network investments and chip manufacturing increase.
Broadcom and Lam Research have more diverse business models and larger services segments, which may buffer against volatility in the AI sector. Both companies are well-positioned for growth and have lower expectations in terms of valuations than Nvidia. Additionally, Broadcom’s recent acquisition of VMware and Lam’s focus on market share in chip production signify a potential for future success.
Investors may find a safer investment in Broadcom or Lam Research due to their established positions in their respective markets and potentially lower risks compared to Nvidia. Both companies are well-prepared to benefit from the growing AI industry, regardless of which chipmaker dominates the market in the future. Nvidia, while currently dominant, faces increasing competition and uncertainty in the AI sector in the coming years.
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https://www.fool.com/investing/2024/06/24/better-stock-split-artificial-intelligence-ai-stoc/