3 AI Stocks Divided Stocks to Buy Before They Rise Up to 240%, According to Select Wall Street Analysts

In the past few years, stock splits have returned to popularity. The practice was a common occurrence in the 1990s and fell by the wayside, but has seen a resurgence in recent years. A stock split is usually the result of years of strong business and financial results that fuel an increase in the stock price. In the past year, artificial intelligence (AI) has added a new element to the mix, propelling some companies to dizzying new heights.

What’s even more intriguing is that history shows that strong performances that precede stock splits tend to continue. Companies that conduct stock splits generally deliver stock price increases of 25%, on average, in the year following the announcement, compared to average increases of 12% for S&P 500according to data compiled by Bank of America analyst Jared Woodard.

Here are three stock AI stocks that still have a long way to go, according to select Wall Street analysts.

Broadcom: Implied Increase 57%

The first stock divided into stock with a load of growth potential is Broadcom (NASDAQ: AVGO). What sets the company apart is the breadth of its offerings, which include software, semiconductor and security products in the cable, broadband, mobile and data center industries.

To give this context, “99% of all Internet traffic passes through some type of Broadcom technology,” according to the company. This places Broadcom at a crucial place in the accelerated adoption of AI.

The critical nature of its offerings translates into improved results. In the second quarter, revenue rose 43% year over year to $12.5 billion, driving adjusted earnings per share (EPS) up 6% to $10.96. The company is still digesting its acquisition of VMWare late last year, which weighed on profits, but management expects a return to form in fiscal 2025. The company’s forecast suggests its robust growth will continue as management raised its revenue guidance for the whole year. 51 billion dollars, or an increase of more than 42%.

Broadcom’s track record of consistent growth and smart business moves led to a 10-for-1 stock split in mid-July. Despite posting 173% gains since the start of 2023 — which marked the launch of the AI ​​revolution — many Wall Street analysts are still remarkably bullish.

Rosenblatt analyst Hans Mosesmann is the company’s biggest bull. Just before the split, he reiterated his buy rating and raised his price target to a split-adjusted $240 Street-high. This represents potential gains for investors of 57% from Tuesday’s closing price.

The story continues

Mosesmann believes management’s guidance still leaves room for additional upside, driven by sales of AI-centric integrated circuit (ASIC) and application-specific chips used in networking and switching. He also believes that VMWare will soon begin to contribute significantly to Broadcom’s results.

The analyst is not alone in his bullish outlook for Broadcom. Of the 39 analysts who issued an opinion in August, 35 rated the stock a buy or strong buy, and none recommended sale.

Nvidia: an implied 85% advantage

The second split stock with a lot of growth potential is Nvidia (NASDAQ: NVDA). The company pioneered graphics processing units (GPUs) that revolutionized video games, cloud computing and data centers. This technology has become the gold standard for generative AI processing, as its GPUs provide the computing power required for AI.

For the second fiscal quarter 2025 (ended July 28), Nvidia generated record quarterly revenue of $30 billion, up 122% year-over-year, resulting in diluted earnings per share (EPS) of 0.67 dollars, which increased by 168%. The strong results were mainly driven by the data center segment — which includes chips used for AI processing — as revenue rose 154% to $26.3 billion.

A string of successful quarters fueled a meteoric rise in Nvidia’s stock price, which has gained 639% since the start of last year, prompting its 10-for-1 stock split in June. In recent months, some investors have begun to question whether its winning streak can continue, but many on Wall Street believe it still has a long way to go. Just this week, Rosenblatt analyst Hans Mosesmann reiterated his Buy rating and $200 Street-high price target on Nvidia, which represents potential gains of 85% from Tuesday’s closing price.

The analyst sees Nvidia as a victim of its own success, saying its declining gross margin is a “high class problem”. He notes that demand for the company’s current Hopper chips is “much stronger” than many expected, while Nvidia’s upcoming Blackwell processor will be “heavy duty” in the January quarter.

He’s not the only one who thinks the future is bright. Of the 58 analysts who issued an opinion in August, 92% rated the stock a buy or strong buy, and none recommended sale.

Super Micro Computer: 240% Default Surcharge

The last of our trifecta of stock splits with plenty of upside is Super Micro Computer (NASDAQ: SMCI)also known as Supermicro. The company has been at the forefront of custom server design for more than three decades.

Supermicro’s rack-scale servers have a unique architecture that allows users to design a device that best suits their needs. In addition, Supermicro offers state-of-the-art direct liquid cooling (DLC), which is the technology of choice for AI-centric data centers. In fact, CEO Charles Liang estimates that the company has a DLC market share of between 70% and 80%.

In the fourth quarter of fiscal 2024 (ended June 30), Supermicro generated record revenue of $5.3 billion, up 143% year-over-year and 38% quarter-over-quarter. This resulted in adjusted earnings per share (EPS) of $6.25, up 78%. The company’s shrinking profit margin surprised some investors, but Liang cited a temporary holdup and product mix for the problem and expects a rebound shortly.

However, the past two weeks have been challenging for Supermicro investors. Last week, the company was the subject of a brief attack by Hindenburg Research, which alleged accounting problems, third-party transactions and sanctions violations, among other allegations. The next day, Supermicro said it would file its annual report late. This double dose of uncertainty dragged the stock lower.

Most on Wall Street dismissed the report as a rehash of known and existing problems. The company has since issued a letter saying it does not “anticipate any material change” to its fourth-quarter or fiscal 2024 results.

Supermicro’s strong balance sheet has led to share price gains of 438% since AI took center stage early last year. That encouraged the company to announce a 10-for-1 stock split early last month. Loop Capital analyst Ananda Baruah maintains a buy rating and a $1,500 price target on the stock. This represents a potential upside of 240% from Tuesday’s closing price.

The analyst cites Supermicro’s position in the AI ​​server industry and the company’s leadership in complexity and scale. He also suggests the company’s sales will accelerate to a run rate of $40 billion by the end of fiscal 2026, up from management’s estimate of $28 billion for fiscal 2025.

Many of his colleagues on Wall Street are behind him. Of the 17 analysts who covered the stock in August, 12 rated the stock a buy or strong buy and none recommended a sell.

A note on evaluation

It is important to note that these actions have valuations commensurate with the opportunity. Nvidia, Broadcom, and Supermicro currently trade at 38 times, 32 times, and 13 times forward earnings, respectively, compared to a price-to-earnings (P/E) ratio of 29 for the S&P 500.

That said, given their track record of robust growth and the secular tailwinds resulting from AI, I would argue that they are still attractive price.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Nvidia and Super Micro Computer. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

3 AI Stocks Divided Stocks to Buy Before They Rise Up to 240%, According to Select Wall Street Analysts Originally published by The Motley Fool