Super Micro’s (SMCI) First Stock Split – What To Expect

The financial landscape is experiencing a dynamic shift as companies within the artificial intelligence (AI) sector realign their market strategies through stock splits, a move designed to make their shares more accessible to a broader range of investors.

Following the footsteps of Nvidia, which executed its largest forward stock split in history—a 10-for-1 split—Super Micro Computer (NASDAQ: SMCI), a specialist in customisable rack servers and storage, is preparing for its first-ever stock split. If you don't know what to expect from in such circumstances, read our guide on the topic of stock splits.

Nvidia's significant action led to a staggering peak market valuation above $3 trillion, but broader market sentiment and some operational hurdles put a hold on market cap for the time being. Broadcom, known for AI-relevant networking solutions, also jumped on the bandwagon by announcing its inaugural 10-for-1 stock split. The stock also saw a run up in price pre-split, followed by a dip following.

Super Micro Computer has now approved it's own historic 10-for-1 stock split, set to be effective on September 30, 2024. Anticipations are high, with shares expected to begin trading around the $51 mark post-split based on most recent price action. This represents a significant difference in affordability when compared with where SMCI was trading earlier this year, above $1200.

This decision comes on the heels of a substantial sales surge for the company, which reported net sales of $5.31 billion for the quarter ending in June—a remarkable 144% increase compared to the previous year. The boost in sales reflects a growing demand for infrastructure capable of powering AI-accelerated data centres.

Such has been the pace of movement in SMCI that despite 78% gains remaining in tact through 2024 YTD, the last month of price action has seen SuperMicro's stock price drop 44%, more than $20billion in market cap.

Despite this promising longer term trajectory, Super Micro Computer faces potential risks that could dampen its ascent. The company relies on Nvidia's H100 GPUs for its rack servers, which means that any production constraints involving the GPUs could impact Super Micro Computer's ability to meet the burgeoning infrastructure orders. Keeping ahead in the AI infrastructure market requires not only superior technology but also a reliable supply chain.

Investors and industry observers alike are closely monitoring Super Micro Computer as it embarks on this significant corporate milestone. The forthcoming stock split marks a critical juncture, and the direction of a company post split is often not dictated by the corporate action itself, but the operational execution that follows. Whilst the stock will become more affordable, companies have in recent times seen an element of buy the rumour sell the news when it comes to splits.