Broadcom(US:AVGO) The Motley Foolยท2024-06-25 10:41Core Viewpoint - Broadcom has announced a 10-for-1 stock split, joining other semiconductor companies like Nvidia and Lam Research, as the tech sector experiences significant growth driven by artificial intelligence (AI) enthusiasm [1][4]. Group 1: Stock Split Details - A stock split is a financial engineering tool that changes a company's stock price and share count based on the split ratio [2]. - Broadcom's stock split will increase its outstanding shares from approximately 465 million to 4.6 billion, while the stock price will decrease from $1,698 to $169, keeping the market cap constant at $790 billion [3]. Group 2: Reasons for the Stock Split - The surge in AI-related investments has significantly boosted Broadcom's stock, which has increased by 204% since January 2023, nearing its 52-week high of $1,851 [4]. - The high stock price may deter retail investors, prompting the split to make shares more accessible without altering the company's valuation [4]. Group 3: Handling of Stock Splits - Stock splits are managed seamlessly by investment brokers, automatically adjusting the number of shares and average price in investors' accounts post-split [5]. Group 4: Historical Context - Broadcom has previously executed three stock splits while trading under the ticker BRCM before being acquired by Avago Technologies in 2016, after which it has not split its stock [6]. Group 5: Investment Considerations - Valuing semiconductor stocks can be challenging due to the cyclical nature of the industry, and traditional metrics like P/E ratios may not be reliable [7]. - Broadcom's price-to-sales (P/S) ratio of 17.9 is in the middle range compared to peers, indicating a premium valuation relative to most competitors, excluding Nvidia and Arm Holdings [11]. - Investing in Broadcom is recommended based on long-term confidence in AI and the company's potential leadership in the sector, rather than waiting for the post-split price adjustment [12].