In recent years, the practice of stock splits has gained popularity again. It was a common practice in the 1990s and had fallen out of favor, but in recent years it has experienced a revival. A stock split is typically the result of years of strong business and financial performance, driving a soaring share 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 the strong results that precede stock splits tend to continue. Companies that conduct stock splits typically deliver share price increases of 25%, on average, in the year following the announcement, compared with average increases of 12% for the year prior. S&P 500 IndexAccording to data collected by Bank of America Analyst Jared Woodard.
Below are three AI stocks with stock splits that still have a long way to go, according to select Wall Street analysts.
Broadcom: 57% implied upside potential
The first stock split with huge upside potential is Broadcom (NASDAQ:AVGO)What sets the company apart is the breadth of its offering, which includes software, semiconductors and security products for the cable, broadband, mobile and data center industries.
For context, “99% of all Internet traffic passes through some form of Broadcom technology,” according to the company. This puts Broadcom in a crucial position in the accelerated adoption of AI.
The mission-critical nature of its offerings is translating into improved results. In the second quarter, revenue rose 43% year-over-year to $12.5 billion, boosting adjusted earnings per share (EPS) 6% to $10.96. The company is still digesting its acquisition of VMWare late last year, which is weighing on earnings, but management expects it to be back on track in fiscal 2025. The company’s outlook suggests its strong growth will continue, as management raised its full-year revenue guidance to $51 billion, or growth of more than 42%.
Broadcom’s track record of steady growth and smart business decisions led to its 10-for-1 stock split in mid-July. Despite posting 173% gains since the start of 2023, which marked the start of the AI revolution, many Wall Street analysts remain remarkably optimistic.
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 $240, the Wall Street split-adjusted high. This represents potential gains for investors of 57% compared to Tuesday’s closing price.
Mosesmann believes management’s guidance still leaves room for further growth, driven by sales of AI-focused application-specific integrated circuits (ASICs) and chips used in networking and switching. He also believes that VMWare will soon start to contribute significantly to Broadcom’s results.
The analyst is not alone in his optimistic outlook on 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: 85% implied upside potential
The second stock split with a lot of upside potential is Nvidia (NASDAQ: NVDA)The company pioneered the development of graphics processing units (GPUs) that revolutionized gaming, cloud computing, and data centers. This technology has become the gold standard for generative AI processing, as its GPUs provide the computational power needed for AI.
In the second fiscal quarter of 2025 (ended July 28), Nvidia generated record quarterly revenue of $30 billion, up 122% from the same period last year, resulting in diluted earnings per share (EPS) of $0.67, which increased 168%. The spectacular results were primarily driven by the data center segment (which includes chips used to process AI), as revenue soared 154% to $26.3 billion.
A string of blockbuster quarters have fueled a blistering rise in Nvidia’s share price, which has gained 639% since the beginning of last year, prompting its well-received 10-for-1 stock split in June. In recent months, some investors have begun to wonder whether its winning streak can continue, but many on Wall Street believe there’s a long road ahead. Just this week, Rosenblatt analyst Hans Mosesmann reiterated his buy rating and Wall Street’s highest price target of $200 for Nvidia, representing potential gains of 85% compared to Tuesday’s closing price.
The analyst believes Nvidia is a victim of its own success, saying its gross margin decline is a “high-level issue.” He notes that demand for the company’s current Hopper chips is “much stronger” than many expected, while Nvidia’s upcoming Blackwell chip will “rise strongly” heading into the January quarter.
He’s not alone in thinking 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: Implied Upside Potential of 240%
The last of our trifecta of stocks split into stocks with plenty of upside potential ahead is Supermicrocomputer (NASDAQ: SMCI)also known as Supermicro. The company has been at the forefront of custom server design for over three decades.
Supermicro’s rack-scale servers feature a unique building block architecture, allowing users to design a device that best suits their needs. Additionally, Supermicro offers next-generation direct liquid cooling (DLC), which is the technology of choice for AI-centric data centers. In fact, CEO Charles Liang estimates the company has a DLC market share of 70% to 80%.
In the fourth quarter of its fiscal 2024 (ended June 30), Supermicro generated record revenue of $5.3 billion, up 143% from the same period last year and 38% higher than the previous quarter. This resulted in adjusted earnings per share (EPS) of $6.25, up 78%. The company’s profit margin decline caught some investors off guard, but Liang attributed the issue to a temporary bottleneck and product mix and expects a recovery soon.
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, alleging accounting problems, third-party transactions and sanctions violations, among other accusations. The next day, Supermicro announced it would file its annual report late. This double dose of uncertainty dragged the stock down.
Most Wall Street analysts downplayed the report, saying it was a rehash of known and existing issues. 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 track record has resulted in a 438% share price surge since artificial intelligence came into the spotlight early last year. This 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 high price target on the stock. That represents 240% upside potential compared to Tuesday’s closing price.
The analyst cites Supermicro’s position in the AI server industry and the company’s leadership in terms of complexity and scale. He also suggests that the company’s sales will accelerate to a run rate of $40 billion by the end of fiscal 2026, versus management’s forecast of $28 billion in fiscal 2025.
Many of his Wall Street peers support 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 valuation
It’s important to note that these stocks have valuations that are in line with the opportunity. Nvidia, Broadcom and Supermicro are currently trading at 38, 32 and 13 times their forward earnings, compared to a price-to-earnings (P/E) ratio of 29 for the S&P 500.
That said, given their solid growth track record and the secular tailwinds resulting from AI, I would say they are… still at an 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 Bank of America and Nvidia and recommends them. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
3 AI Stocks That Have Been Split Into Stocks To Buy Before They Soar As Much As 240%, According To Select Wall Street Analysts Originally published by The Motley Fool