This stock split could increase if Nvidia delivers an update in Q2

Which company is in the spotlight this week? Its Nvidia (NASDAQ: NVDA)hands down. The chipmaker will announce its second-quarter earnings results after the market closes on Wednesday.

I fully expect Nvidia’s numbers to excite investors again, allowing it to extend its already impressive earnings this year. But there’s another split stock that could also rise if Nvidia delivers a Q2 update.

Tight at the hip

Super Micro Computer (NASDAQ: SMCI)also called Supermicro, is undoubtedly associated with Nvidia. The company offers server and storage solutions that are particularly popular in data centers.

The same artificial intelligence (AI) tailwind that’s fueling Nvidia’s growth is also helping Supermicro. Charles Liang, Supermicro’s president and CEO, said earlier this month that his company “continues to experience record demand for new AI infrastructure.” As a result, Supermicro’s revenue in the fourth quarter of fiscal 2024 was up 110% year-over-year.

If Nvidia easily beats expectations with its Q2 results on Wednesday (and, more importantly, if the company’s guidance is strong), it will bode well for Supermicro’s near-term fortunes. I’m waiting for Nvidia to also provide some clarity on when chips based on its new Blackwell architecture will start shipping. This should also help Supermicro, which has liquid-cooled AI superclusters ready to support Blackwell.

Of course, Liang argues that a delay for Blackwell won’t hurt Supermicro much because it does business with other chip makers. Make no mistake, though: good news from Nvidia will translate to good news for Supermicro.

Will the Supermicro stock split provide another catalyst?

I don’t think there’s much doubt that an Nvidia Q2 update would provide a catalyst for Supermicro. But what about the company’s 10-for-1 stock split scheduled for Oct. 1? It is unsafe in my view.

First, the Supermicro stock split will change absolutely nothing about the company’s core business or growth prospects. On the other hand, spectacular guidance from Nvidia would likely mean stronger growth for Supermicro.

Any investor who really wanted to buy Supermicro stock could do so even with the stock trading at $600. Many online brokerages accept the purchase of fractional shares.

However, this will be Supermicro’s first stock split. I recognize that some investors who have been left on the sidelines may see the split as a great opportunity to buy the stock. I suspect the appeal of investing in Supermicro could be even greater if the stock does indeed rise as I expect it to after Nvidia’s quarterly update this week.

The story continues

Is Supermicro a better stock to buy than Nvidia?

Now for an even more important question: Is Supermicro a better stock to buy than Nvidia? Wall Street seems to think so.

The 12-month consensus price target for Supermicro of analysts polled by LSEG in August reflects a growth potential of over 50%. By comparison, the average price target for Nvidia is light below than the current price.

I agree that Supermicro is a better choice than Nvidia. My main reasoning is valuation. Supermicro’s stock trades at a much lower forward earnings multiple than Nvidia’s. But if Nvidia delivers great news to investors on Wednesday, both of these stocks should be big winners.

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

This Stock Split Could Rise If Nvidia Delivers A Q2 Blowout Update was originally published by The Motley Fool