Stock-Split Watch: 2 AI Stocks That Look Ready to Split
Artificial intelligence (AI) is no longer the stuff of sci-fi. It’s here, and it’s become one of the most powerful technological advancements shaping industries today. As AI continues its stupendous growth, companies in this space are seeing their stocks soar. For investors, the notion that these stocks might soon face a split is something worth paying attention to. Today, we’re going to dig deep into two AI-driven companies — Meta Platforms ($META) and ServiceNow ($NOW) — that are looking primed for a stock split. When a company’s share price rises dramatically, a stock split can be a smart move to attract more investors. Let’s dive in and see why these two companies are likely heading in that direction.
Why Would a Company Consider a Stock Split?
First, let’s clarify what a stock split is and why it’s such a big deal in the stock market. Essentially, a stock split happens when a company decides to divide its existing shares into multiple ones. This doesn’t change the value of the company, but it lowers the individual share price, making the stock more affordable for smaller investors. It also creates more liquidity in the market, helping drive trading volume.
Take this scenario, for instance: If a company performs a 2-for-1 stock split, each shareholder gets twice the number of shares they originally had, but the price of each share is halved. If you had one share worth $1,000, after a 2-for-1 split, you’d own two shares, each worth $500. Importantly, the actual value of your investment doesn’t change.
Stock splits are often an excellent way for a company to maintain its stock’s accessibility while continuing to grow in value. Now, looking at Meta Platforms and ServiceNow, there are some clear signs that a stock split could be around the corner.
Meta Platforms: Growing in the AI Space
Meta Platforms, the company formerly known as Facebook, has been steadily transforming itself from a social media giant to a pioneer of AI. This transition has had phenomenal success, boosting its stock price significantly. Meta’s focus on AI-driven initiatives—such as its AI-powered advertising optimization tools—has generated momentum and a lot of buzz. The company has also been exploring the AI space in multiple other areas, including content recommendations and its ambitious work in the metaverse.
Meta’s stock price has seen a massive rise as investors buy into its AI-driven future. As of now, shares are trading in the ballpark of $300 to $400, which can be pricey for average investors. While this isn’t unusual for high-growth tech companies, a stock price that high could trigger a stock split to make shares more accessible. Historically, companies like Meta have performed stock splits when their shares begin to price smaller investors out of the market. It wouldn’t be too surprising if Meta followed suit, particularly if its AI efforts—and revenue—keep climbing the way they have.
ServiceNow: AI-Driven Workflows Driving Growth
Up next, we have ServiceNow, a company that is less widely known than Meta but equally intriguing in terms of its AI capabilities. ServiceNow operates in the enterprise tech space, helping companies digitize and automate workflows. As companies aim to optimize operations and reduce costs, ServiceNow’s AI and machine learning tools come in handy to automate seemingly repetitive corporate tasks and manage complex workflows. Thanks to AI, ServiceNow has been able to enhance the efficacy of its platform, streamlining business processes and delivering superior service functionality. Simply put, it’s making daily business operations smoother and more efficient.
Like Meta, ServiceNow has also seen significant stock price growth as investors discover its usefulness in the AI age. Currently, its share price hovers around $600, and this could signal the need for a stock split to boost liquidity and widen its appeal to retail investors. At such a high price, shares of ServiceNow may be out of reach for many potential investors. A stock split could be the next logical move as the company builds its empire in the AI field.
Why AI-Driven Companies Are Hot Right Now
Not only are AI-driven companies making headlines—many are seeing their stocks skyrocket. The reason is pretty simple: AI is revolutionizing businesses across every sector. Whether it’s automating complex processes, analyzing massive amounts of data to produce actionable insights, or even personalizing consumer interactions, AI holds considerable promise and profitability.
Here’s a quick breakdown of the reasons why investors are turning to AI-focused companies:
- Cost Efficiency: AI makes processes more streamlined, saving companies money on labor costs while boosting productivity.
- Scalability: AI allows companies to scale operations quickly by automating tasks that traditionally required human intervention.
- Innovative Growth: AI is continuously evolving, giving early adopters a competitive edge in an ever-demanding market.
As a result, many AI-focused businesses, including Meta and ServiceNow, are seeing their stock prices surge. This increases the allure of stock splits since it would offer more tradable shares at prices that are accessible to a broader swath of investors.
Past Examples of High-Tech Stock Splits
Stock splits among high-tech and AI-driven firms aren’t new. In fact, some of the most successful companies have chosen this approach to keep their stocks affordable for individual investors. Both Amazon and Tesla are prime examples. Tesla had a 5-for-1 stock split in 2020 after its shares skyrocketed, making its stock more accessible to its loyal retail investor base. The split also reignited demand, driving Tesla’s value even higher post-split.
Similarly, Amazon performed a split in 2022, which once again drew in more retail investors and made its shares more affordable. Though the act of splitting doesn’t fundamentally change a company’s value, it does tend to boost accessibility. Plus, many investors see a stock split as a signal of future growth, prompting more people to buy in.
If Meta or ServiceNow were to announce stock splits, they’d be continuing in the footsteps of these major tech players who’ve used this move as a strategy to bring in more investors, keep trading volume up, and position themselves for long-term growth.
Advantages and Risks of a Stock Split
Stock splits are a double-edged sword. On the one hand, they present real advantages like lowering the entry price for more investors, increasing trading liquidity, and improving market sentiment. On the other hand, stock splits aren’t without their risks. Just because a company performs a stock split doesn’t necessarily mean that the stock will continue to rise. In some cases, a company’s elevated stock price could lead to overvaluation, and a stock split could cause prices to correct soon afterward.
Here’s a brief list of both advantages and risks to keep in mind:
- Advantages:
- Lower share price, allowing for more widespread ownership.
- Increased trading liquidity and stock volume.
- Positive market sentiment as investors anticipate future growth.
- Risks:
- Stock price volatility in the short term.
- Potential overvaluation if the price soars too rapidly post-split.
For most investors, the benefits of a stock split — especially with companies as reputable and robust as Meta and ServiceNow — still outweigh the risks. However, it’s always a good idea to stay cautious and consider the bigger picture before jumping in.
Should You Invest Before or After the Split?
One of the most common questions investors have is whether to buy shares before or after a stock split. The answer largely depends on individual investment goals and the current market situation. Some investors like to buy before the split due to the anticipation that the company’s stock could see a temporary boost in value after the announcement. Others prefer waiting for the stock price to settle after the split to avoid initial price volatility.
Regardless, companies typically perform stock splits when they’re confident in their financial growth and future outlook. A stock split from Meta or ServiceNow would likely signal ongoing positive developments in the AI space, which could make either company a compelling long-term play.
Bottom Line: Will We See a Split Soon?
Both Meta and ServiceNow are well-positioned to potentially announce a stock split in the near future. With AI turbocharging their growth and shares trading at quite a premium, a split not only makes sense but could also attract even more investors to these already attractive companies. Whether you’re a long-term investor or someone just looking to dip a toe into AI tech stocks, keeping a close eye on potential splits from these companies could be a smart move.
So, what’s next? Stay informed and keep an eye out for any announcements regarding their stock. Both companies are playing a significant role in the rapidly evolving AI sector, making them solid candidates for further growth—and possibly, a stock split—very soon. Happy investing!
Originally Written by: Bram Berkowitz
