2 Stock-Split Stocks Billionaires Are Piling Into for 2025

In a little over a week, investors will cross the finish line for what looks to be another phenomenal year for Wall Street. As of the closing bell on Dec. 19, the ageless Dow Jones Industrial Average, widely followed S&P 500, and growth stock-driven Nasdaq Composite had respectively gained 12%, 23%, and 29% on a year-to-date basis.

While the rise of artificial intelligence (AI) has been the undisputed top catalyst behind Wall Street's outperformance in 2024, investor euphoria for companies enacting stock splits has played a very close second fiddle.

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A stock split is a tool publicly traded companies can utilize to adjust their share prices and outstanding share counts by the same factor. A company's market cap and underlying operating performance are unaffected by a split.

Stock splits come in two forms -- forward and reverse -- with investors overwhelmingly favoring the former. A forward stock split reduces a company's share price to make it more nominally affordable for retail investors who aren't able to buy fractional shares through their brokers.

Generally, companies completing forward splits have consistently out-innovated their competition, which a rising share price tends to indicate.

This outperformance for stock-split stocks isn't lost on Wall Street's brightest money managers. As we prepare to barrel into 2025, billionaires are piling into two prominent stock-split stocks.

Broadcom

The first stock-split stock that two top-notch billionaire money managers want to own as we head into 2025 is the premier company in artificial intelligence (AI)-networking solutions, Broadcom (NASDAQ: AVGO). Broadcom completed its first-ever split (10-for-1) in mid-July.

Billionaire Philippe Laffont of Coatue Management, who oversees nearly $27 billion in assets under management, purchased 1,488,666 shares of Broadcom during the September-ended quarter. Meanwhile, Stanley Druckenmiller of Duquesne Family Office opened a new position totaling 239,980 shares.

The lure for billionaire asset managers is that Broadcom's AI-networking solutions are the preferred choice for businesses. Its Jericho3-AI fabric can connect up to 32,000 graphics processing units (GPUs) to maximize their computing capabilities and minimize tail latency. Reducing lag/response time is especially important when AI-driven software and systems are making split-second decisions and running generative AI solutions.

In fiscal 2024, which ended on Nov. 3, Broadcom generated $12.2 billion in AI sales. Over the next three years, CEO Hock Tan believes its three largest hyperscale customers could spend between $60 billion and $90 billion on custom AI chips, which would give it a sustainable double-digit sales growth runway.

However, Laffont and Druckenmiller might also appreciate that Broadcom is far more than just an AI stock. Although artificial intelligence solutions account for the lion's share of its current growth, a significant portion of Broadcom's revenue comes from providing wireless chips for next-generation smartphones. It's also a key player in cybersecurity solutions and provides a laundry list of optical components and sensors to the industrial sector.

As I've stated previously, if an artificial intelligence bubble were to take shape and burst, Broadcom would be better-positioned than direct players like Nvidia to deal with the outcome.

Perhaps the one question for Broadcom to answer in 2025 is: Has its stock has come too far, too fast?

Shares of the company are valued at close to 20 times trailing-12-month (TTM) sales, which is well above its average multiple to TTM sales over the last five years of 8.2. Annual growth rates, which are forecast in the mid-teens, might not leave much (if any) room for additional upside next year.

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Super Micro Computer

The second stock-split stock that at least one prominent billionaire fancies ahead of the new year is customizable rack server and storage-solutions company Super Micro Computer (NASDAQ: SMCI). Supermicro completed its first-ever split (also 10-for-1) at the end of September.

Perhaps it's no coincidence that Supermicro's buyer was Coatue Management's Philippe Laffont. His fund places an emphasis on cutting-edge growth stocks, and the 241,610 shares of Supermicro that were purchased by Coatue in the third quarter is consistent with this theme.

Just as Broadcom has become the premier option in AI networking, Super Micro Computer has ascended the ranks as a top option for data center infrastructure. The company's customizable rack servers incorporate Nvidia's computationally superior GPUs, which has only enhanced demand for its products.

In early August, Super Micro reported close to $15 billion in net sales for fiscal 2024 (ended June 30), which represented sales growth of 110% from the previous year. Based on Wall Street's current consensus, sales for the company may double to $30 billion by fiscal 2026.

Although Super Micro Computer appears ideally positioned to benefit from the rise of AI, it's a stock-split stock that carries more risk than most.

In late August, noted short-seller Hindenburg Research released a report that alleged Super Micro had engaged in "accounting manipulation, sibling self-dealing, and sanctions evasion." Following the release of this report, the company has delayed the filing of its fiscal 2024 annual report, seen its accounting firm Ernst & Young resign after previously raising concerns about internal controls at Supermicro, and is reportedly being probed by U.S. regulators, per The Wall Street Journal.

If there's a silver lining here, it's that an independent special committee expects no financial restatements. But until the company's new auditor signs off on its financial statements, and those statements are filed with the Securities and Exchange Commission, there's an undeniable grey cloud hovering above Super Micro Computer.

While it's possible Laffont could have nabbed himself a bargain for 2025, I suggest erring on the side of caution and keeping your distance until there are more definitive answers.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.