In the first half of 2024, the stock market has seen significant gains, with the S&P 500 growing by 15% and the Nasdaq Composite by almost 18%. This surge is largely driven by the technology sector, particularly due to the rise of artificial intelligence (AI) related companies. As stock prices climb, some companies, including Broadcom, have opted for stock splits to make their shares more accessible to a wider investor base.
Broadcom recently announced a 10-for-1 stock split, which will increase its outstanding shares while decreasing the share price. This move comes as AI continues to drive growth in the chip sector, with Broadcom shares soaring over 200% since January 2023. Investors may be hesitant to buy at the company’s high price, but a stock split doesn’t necessarily indicate a change in market capitalization.
If you currently own Broadcom shares, your broker will handle all the adjustments related to the stock split automatically. The company has previously undergone three stock splits before being acquired by Avago Technologies in 2016 and then renamed Broadcom Inc. Since then, the company has not split its shares.
Valuing semiconductor stocks can be complex, given the cyclical nature of the industry and the current high demand due to the AI revolution. While Broadcom’s price-to-sales multiple is on par with its peers, the stock’s high valuation may deter some investors. However, waiting until after the split to buy shares may not necessarily result in a lower price, as stock splits can drive up volatility and momentum, ultimately leading to higher prices.
Investing in Broadcom should be based on a long-term conviction in the company’s position in the AI market. As an industry leader, Broadcom offers exposure to long-term growth potential in AI. Smart investors may see this as an opportunity to diversify their chip stock portfolio or capitalize on the AI trend.
Before investing in Broadcom, investors should consider the advice of financial analysts who recommend stocks for long-term growth potential. The Motley Fool, for example, offers guidance and stock picks that have historically outperformed the market. Ultimately, investing in Broadcom should be based on a solid understanding of the company’s prospects in the AI sector and its long-term growth potential.
Article Source
https://finance.yahoo.com/news/5-things-smart-investors-know-104100614.html
