3 Stocks to Buy in the Wake of Nvidia's 10-for-1 Split – InvestorPlace
Harness the AI wave with three top stocks to buy in Nvidia's split wake
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Nvidia (NASDAQ:NVDA) recently completed its much-anticipated 10-for-1 stock split. That means traders who held one share of Nvida at around $1,200 per share now own ten Nvidia shares trading at around $120 per share. Investors have started considering other stocks to buy after Nvidia’s stock split. Given the reduced barrier for buying whole shares, it is typical for share prices to increase in the days and weeks following a split.
A stock split also signals management confidence in the company’s long-term outlook. Nvidia’s shares rose modestly on the first day of trading after the split. However, several analysts adjusted their price targets upward.
The broader sentiment appears to be that confidence remains strong about the ongoing growth of artificial intelligence (AI). While some debate exists around whether this growth constitutes a bubble, most analysts do not believe it is near bursting.
Given Nvidia’s leadership position, its actions will likely impact other companies within the sector. Its success has even led to discussions about replacing Intel (NASDAQ:INTC) in the Dow Jones Industrial Average. Competitors like Intel may face challenges, but other firms could find opportunities.
If Nvidia is attractive because it sells AI cards, then the semiconductor manufacturer producing the chips needed for those cards deserves attention. The less prominent TSM (NYSE:TSM) counts Nvidia as its second-largest customer. Even if rivals start designing and manufacturing their own AI servers, they will still likely require TSM for chip production.
Apple (NASDAQ:AAPL) is working on its own AI chips and is TSM’s largest customer. Tesla (NASDAQ:TSLA) and Meta Platforms (NASDAQ:META) are also said to work on custom chips and are TSM customers. Intel and Advanced Micro Devices (NASDAQ:AMD) chips are also manufactured by TSM. In other words, if an AI requires a chip to function, it likely has a TSM component, making this a logical consideration as one of the AI stocks to buy after Nvidia’s stock split.
The Taiwanese semiconductor foundry trades at a relatively affordable price-to-earnings (P/E) ratio of 32.3x for a technology company, just over half of Nvidia’s 71.6x. Analysts overwhelmingly have a positive outlook for TSC stock, with a history of exceeding estimates. Taiwan semi also offers shareholders a more generous dividend yield of 1.5% compared to Nvidia’s minimal 0.035%.
After Nvidia’s recent stock split, looking for chip stocks in the 5G and data centers sectors is prudent. Marvell Technology (NASDAQ:MRVL) designs AI chips and infrastructure that major technology firms use. The company has seen solid gains, but analysts believe there is further upside potential thanks to expected growth in custom AI chips.
Marvell provided strong guidance in its latest earnings report, expecting 8% revenue growth in a single quarter and an even stronger second half of the year. Despite lacking a P/E ratio following its reported losses, its forward P/E of 51.16x suggests investors are willing to pay the premium after Nvidia’s stock split.
While the company remains unprofitable, analysts are optimistic about the MRPV stock and anticipate reporting its first profits in the second quarter. The average price target is $88.92 per share, representing a 26% upside from the current price. Its 52-week high hovers marginally lowered at $85.76 per share, still offering a 22% upside.
This cloud networking solutions provider is one of the ancillary beneficiaries of the surge in AI demand. Arista Networks (NYSE:ANET) high-performance networking solutions and data center switches are integral to building out AI systems, making them an essential element of the expansion of AI.
As one of the stocks to buy after Nvidia’s stock split, the company is targeting revenue from its AI solutions business to reach $750 million next year, becoming the largest component of its sales. That’s up from near nothing just two years ago. The company saw its EPS grow by 44% over the last year, with its gross margin up to 63.7% from 59.5% as it leverages into the higher-margin AI segment.
Even considering this growth, the company still maintains a relatively appealing P/E ratio of 41.3x, just below the average for the tech sector at 45.2x. Analysts recommend buying the stock, with most setting an average price target of $319.29 per share.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.
5G, Artificial Intelligence, Cloud, Communications, Semiconductor, Technology
Article printed from InvestorPlace Media, https://investorplace.com/2024/06/three-stocks-to-buy-in-the-wake-of-nvidias-10-for-1-split/.
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