How do you make expensive stocks cheap?

Welcome to AI Collision 💥,

In today’s collision between AI and our world,

• Cutting up the pie to fuel the gains

• Let’s go to the video replay…

• Kylo Ren chillin’

If that’s enough to get the stock splitting, read on…

AI Collision 💥 SALE: all prices slashed!

Take a look at the prices of the following stocks:

• Nvidia (NASDAQ:NVDA) – stock price $880

• Super Micro Computer (NASDAQ:SMCI) – stock price $1,121

• Meta (NASDAQ:META) – stock price $550

• ASML Holding (NASDAQ:ASML) – stock price $984

• Broadcom (NASDAQ:AVGO) – stock price $1,360

• Microsoft (NASDAQ:MSFT) – stock price $402

What do you notice about them all?

Yes, they’re all traded on the Nasdaq.

What else?

I’ll help out: they’re related to the AI investment boom we’re in the midst of right now.

But also…

They’re all very bloody expensive on a per-share basis.

The cheapest in that list is Microsoft at $402.

That means before you get a single MSFT share you need $402 (plus costs) to trade it.

For the most expensive, Broadcom, you’re not getting near it unless you’ve got nearly $1,400 (£1,100) to start with.

Now I will tell you this, most investors, that regularly like to invest and contribute to investment savings, aren’t putting in $1,100 a month to invest.

Some people have that much to invest in a whole year.

This is a problem.

A lot of smaller investors are getting priced out of the market. They can’t afford to buy some of these big AI-focused stocks.

So if you’re a company with a really expensive stock, how do you make it cheaper?

You cut it up, that’s what. Slash those prices!

And you do that with what’s called a stock split.

It means if you’ve got 1 million shares, you split ‘em up at a ratio that you determine – like four-for-one as an example – so you end up with 4 million shares.

But that means, for existing shareholders, where you might have once had 10 shares, after a stock split like this, you’ll end up with 40.

Here’s the thing though: the stock price doesn’t stay the same, not immediately at least.

If you’ve got a stock trading at $1,000 and you four-for-one split it, the nominal price of that stock drops to $250 immediately after the split.

Now, spending $250 on a stock is a helluva lot easier than $1,000.

It instantly unlocks access for a whole bunch of investors that may have been waiting on the sideline.

And often we see a stock price bump higher after a stock split because of that influx of demand.

And in some cases, after a stock split, the stock will then charge higher and after time, may ever reach the same price that it was when it last split.

Nvidia is a great example of that. It’s done a few stock splits over the years. The last time it did it, in 2021, its stock price was around $750.

The company did a four-for-one split. Now just three years later, the stock is trading at $880!

Now, that doesn’t happen all the time. But it can. And if you’re a holder before the stock splits, you can often see a little bump in price after a split takes place.

Why this is important in the context of the market today is that a lot of tech stocks are EXPENSIVE.

Not just AI stocks either. Netflix is at $595, MicroStrategy is over $1,100, Adobe is at $540.

I think 2024 is going to see a whole range of companies split their stock. It will be the year of the splits. And it will benefit holders of some of these stocks as they unlock that demand and excitement for their companies.

It may even fuel this market into a stronger bull run, that’s driven by AI and then dragging a whole bunch of other big tech higher.

The point is, if you’re sat on the sidelines thinking if this momentum is about to turn away or slow down, well my take is, it’s not.

And if we start seeing some of these stock split, then I think it will actually end up in a stronger, longer bull run. So don’t sit on your hands, be invested, and make sure you’re in the right stocks that could benefit from some splits.

AI Gone Wild 🤪

On Tuesday night I held a livestream AMA.

We covered a lot.

Answered loads of great questions about the AI market and AI investing. Some questions included, “Should I be riding the Nvidia/AMD/chips train higher?” and “Are there any AI ETFs in the UK?” and even, “How do I buy AI stocks?”

I appreciate not everyone had a chance to make it, it was quite short notice after all. And I’m sure some people still didn’t even know it was on.

Thankfully we recorded it. As promised, you’ll be able to access that recording now at your own leisure.

Just head to the button below or click on the image which will take you to the replay page.

Enjoy…

[Capital at risk.]

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

Boom 📈

• AeroVironment (NASDAQ:AVAV) up 41%

• BigBear.ai (NASDAQ:BBAI) up 27%

• AMD (NASDAQ:AMD up 19%

Bust 📉

• Tesla (NASDAQ:TSLA) down 12%

• iRobot (NASDAQ:IRBT) down 8%

• Google (NASDAQ:GOOG) down 4%

From the hive mind 🧠

• The idea of using AI in your work isn’t and shouldn’t be that crazy…but what if AI is the one hiring you in the first place? That weird reality isn’t far away at all.

• Elon sues OpenAI. OpenAI releases some emails Elon wrote many moons ago. OpenAI then promises to be better. It’s definitely going to make for a great Netflix series down the track I’m sure.

• Everyone is big on AI. And although Nvidia has a long lead in the tech stakes, followed by AMD, Qualcomm too is now flaunting their “chip chops” when it comes to the latest in AI tech.

Artificial Polltelligence 🗳️

This week’s poll comes courtesy of a question that we got from our livestream Q&A the other night around the idea of ETFs (exchange traded funds).

Weirdest AI image of the day

Kylo Ren relaxing with an ice cold Cerveza Cristal – r/Weirddalle

ChatGPT quote of the day

Thanks for reading, see you on Tuesday. And if you’re enjoying our work, please like, share and leave comments below,

Sam Volkering

Editor-in-Chief

AI Collision

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