In recent years, stock splits have seen a resurgence in popularity. The practice was commonplace in the 1990s and fell into disuse, but has seen a renaissance in recent years. A stock split is typically the culmination of years of strong business and financial performance, fueling a rising stock price. In the past year, artificial intelligence (AI) has added a new element to the mix, helping some companies reach dizzying new heights.
Even more intriguing, history shows that the strong performance that precedes stock splits tends to persist. Companies that execute stock splits typically deliver an average share price increase of 25% in the year following the announcement, compared to an average increase of 12% for stock splits that are S&P 500according to data collected by Bank of America analyst Jared Woodard.
Here are three AI stocks with stock splits that have a long way to go, according to a select group of Wall Street analysts.
Broadcom: Implied Up 57%
The first stock with a stock split and a boatload of upside potential is Broadcom (NASDAQ: AVGO)What sets the company apart is the breadth of its offerings, which include software, semiconductor and security products for the cable, broadband, mobile and data center industries.
To give this some context, “99% of all internet traffic passes through some form of Broadcom technology,” the company says. This puts Broadcom in a critical position in the accelerating adoption of AI.
The critical nature of its offering is translating into improving results. In the second quarter, revenue rose 43% year over year to $12.5 billion, helping adjusted earnings per share (EPS) rise 6% to $10.96. The company is still digesting its acquisition of VMWare late last year, which is weighing on earnings, but management predicts a return to form in fiscal 2025. The company’s guidance suggests robust growth will continue, as management raised its full-year revenue forecast to $51 billion, or growth of more than 42%.
Broadcom’s track record of consistent growth and smart business moves led to its 10-for-1 stock split in mid-July. Despite a 173% gain since the start of 2023 — marking the beginning of the AI revolution — many Wall Street analysts are still remarkably bullish.
Rosenblatt analyst Hans Mosesmann is the firm’s biggest bull. Just before the split, he reiterated his buy rating and raised his price target to a Street-high, split-adjusted $240. That represents potential gains for investors of 57% compared to Tuesday’s closing price.
Mosesmann believes management’s guidance leaves room for additional upside, driven by sales of AI-centric application-specific integrated circuits (ASICs) and chips used in networking and switching. He also believes VMWare will soon start to contribute meaningfully to Broadcom’s results.
The analyst is not alone in his optimistic prediction about Broadcom. Of the 39 analysts who issued an opinion in August, 35 rated the stock as a buy or strong buy, and no recommended sales.
Nvidia: Implied upside 85%
The second stock with a stock split and a lot of upside potential is Nvidia (NASDAQ: NVDA). The company pioneered graphics processing units (GPUs) that revolutionized video games, cloud computing, and data centers. The technology has become the gold standard for generative AI processing, as GPUs provide the processing power needed for AI.
For the second quarter of its fiscal year 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, which rose 168%. The blockbuster results were primarily driven by the data center segment – which includes the chips used to process AI – as revenue rose 154% to $26.3 billion.
A series of blockbuster quarters has fueled a devastating rise in Nvidia’s stock price, which has surged 639% year-to-date, leading to a well-received 10-for-1 stock split in June. In recent months, some investors have begun to question whether the winning streak can continue, but many on Wall Street believe it has a long way to go. This week, Rosenblatt analyst Hans Mosesmann reiterated his Buy rating and Street-high price target of $200 on Nvidia, representing a potential upside of 85% from Tuesday’s close.
The analyst believes Nvidia is a victim of its own success, saying that declining gross margins are 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 is “going to ramp up strongly” heading into the January quarter.
He’s not the only one who believes the future is bright. Of the 58 analysts who gave an opinion in August, 92% rated the stock a buy or strong buy, and no recommended sales.
Super Micro Computer: Implied Up 240%
The last of our trifecta of stock split stocks with lots of upside potential is Supermicrocomputer (NASDAQ: SMCI)also known as Supermicro. The company has been at the forefront of custom server design for more than three decades.
Supermicro rack-scale servers have a unique building block architecture, allowing users to design a device that best suits their needs. Additionally, Supermicro offers industry-leading direct liquid cooling (DLC), the technology of choice for AI-centric data centers. In fact, CEO Charles Liang estimates 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 declining profit margin surprised some investors, but Liang cited a temporary bottleneck and product mix as reasons for the issue and expects a recovery in the near term.
The past few weeks have been challenging for Supermicro investors, however. Last week, the company was the subject of a brief attack by Hindenburg Research, citing accounting issues, third-party transactions and sanctions violations, among other issues. The next day, Supermicro said it would be late filing its annual report. This double dose of uncertainty dragged the stock down.
Most on Wall Street dismissed the report, saying it was a rehash of known and existing problems. The company has since issued a letter saying it expects “no material changes” to its fourth-quarter or fiscal 2024 results.
Supermicro’s strong track record has resulted in a 438% gain in share price since AI entered the spotlight early last year, emboldening the company to announce a 10-for-1 stock split early last month. Loop Capital analyst Ananda Baruah maintains a Buy rating and a Street-high price target of $1,500 on the stock. That represents a potential upside of 240% from Tuesday’s close.
The analyst cites Supermicro’s position in the AI server industry and the company’s leadership in terms of complexity and scale. He further suggests that the company’s revenue will accelerate to a $40 billion run rate by the end of fiscal 2026, up from management’s forecast of $28 billion in fiscal 2025.
Many of his Wall Street peers are behind him. Of the 17 analysts who covered the stock in August, 12 rated it a buy or strong buy, and none recommended selling.
A note on appreciation
It’s important to note that these stocks have valuations that are relative to the opportunity. Nvidia, Broadcom and Supermicro currently trade at 38x, 32x and 13x 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 arising from AI, I would argue that they still attractively priced.
Should You Invest $1,000 in Broadcom Now?
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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 Stock-Split AI Stocks You Need to Buy Before They Soar As Much as 240%, According to Select Wall Street Analysts was originally published by The Motley Fool
