Investing

TSM vs. AMD: Which Stock Will Split Next?

Joey Frenette

Published: November 18, 2024 8:50 am

With the tech rally taking things into high gear this year, I’m sure many new retail investors are asking themselves which big name in tech will be next to split. Indeed, we’ve encountered more than a handful of big stock splits amid the red-hot rally in tech plays. And though the post-election stock rally cooled off last Friday, I still do not think it’s lights out for tech. Not as we learn more about generative artificial intelligence (AI) and the new ways it can improve lives and pull in revenue in the new year.

Though a major sell-off in tech and AI plays is always a possibility for the new year, I’d argue that some names have already endured a painful correction, making them intriguing opportunities for prospective dip buyers who don’t have as much AI exposure as they’d like but remain conscious of valuation.

In this piece, we’ll look at two semiconductor stocks that have corrected of late but could be in prime position to pick up traction again going into 2025. As for which stock will be next in line to split remains a mystery. Personally, I think investors are making too much of an event, which, I believe, is less actionable than a correction in shares.

At the end of the day, it’s plunges in share price, not 10-for-1 or 4-for-1 stock splits that allow self-guided investors a chance to get more for their invested buck. While stock splits can draw attention from the smaller, momentum-chasing retail crowd, it’s important to remember that splits themselves do not create value. Rather, they may be an indicator that a stock is in the midst of a multi-year rally that’s robust enough to keep it out of reach of some of the smaller investors out there.

Key Points About This Article

• TSM and AMD are hot semi stocks that aren’t close to splitting. But if the AI boom picks up, a split could hit within four years.
• Given TSM’s tailwinds, I’d say it’s next to split. But it probably won’t happen within two years.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
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Taiwan Semiconductor

Speaking of robust rallies, Taiwan Semiconductor (NYSE:TSM) stock is up 89% over the past year and more than 134% in the past two years. Though shares corrected close to 10% from their recent all-time highs, I’d not be too surprised if the global foundry kingpin were to return to rally mode after its latest cool-off period.

At the end of the day, Taiwan Semiconductor is critical to feeding the AI boom. And while the Trump administration wants more semiconductor production moved to America, it’s important to remember that such a substantial move takes time. Further, Taiwan Semiconductor is well-equipped to continue expanding beyond Taiwan’s borders. This should make Taiwan Semiconductor less at risk of geopolitical tensions over time.

Notably, the company’s fab expansion into Arizona is most intriguing. Under the Trump administration, I’d not at all be surprised if Taiwan Semiconductor gets even more aggressive with its expansion. At 21.2 times forward price to earnings (P/E), TSM stands out as a value stock. It even has a nice, growing dividend of 1.47%. As Taiwan continues its expansion, I’d not want to bet against the stock.

Though a split is still a ways away, with shares going for $186 per share, another double could be enough to warrant a 4-for-1 split. As to when that’ll happen, I’d say within the next four years is realistic if TSM benefits from further multiple expansion while the AI boom continues.

Advanced Micro Devices

Advanced Micro Devices (NADSAQ:AMD) stock doesn’t look like it needs a split anymore. Not after falling 35% from its peak level of $210 and change per share. Today, AMD stock goes for a very attainable $134 and change. With the company cutting 1,000 jobs as it shifts gears, I can’t say the tides are poised to turn anytime soon.

Over the long run, AMD is bound to be a major winner from AI’s continued ascent. That said, the latest fall into a bear market could take many quarters to rise out of. And with such a choppy medium-term trajectory, I’d say a split has a very low chance of happening within the next three years.

In any case, between TSM and AMD, I’d say TSM is the closer one to a split. That said, I don’t expect the split will arrive anytime within the next two years. If you’re keen on TSM or AMD, I’d just buy at current prices, wait for a further pullback, or explore the possibility of buying partial shares of either company.