Nvidia (NVDA 4.16%), Broadcom (AVGO 2.96%), and Super Micro Computers (SMCI 7.53%) (also known as Supermicro) share several things in common. All three companies have profited from the surging demand for artificial intelligence (AI). All three have declared 10-for-1 stock splits in 2024. Each stock has soared this year but pulled back significantly in recent weeks.
Another common denominator between Nvidia, Broadcom, and Supermicro is that they've all been favored by analysts. But which stock-split stock does Wall Street like the most now?
The winner based on buy recommendations
Perhaps the easiest way to determine which of these stocks Wall Street is most bullish about is to look at the buy recommendations for each stock. And one of them appears to be the hands-down winner.
Of the 29 analysts surveyed by LSEG in September who cover Broadcom, 10 rate the stock as a "strong buy." Another 17 recommend Broadcom as a "buy." In other words, 93% of analysts like the stock. By the way, none of the surveyed analysts recommend selling Broadcom. The two outliers rate the stock as a "hold."
NASDAQ: AVGO
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Nvidia comes in a distant second place. LSEG surveyed 38 analysts this month who cover the stock. Seven recommended Nvidia as a "strong buy" with another 14 recommending it as a "buy." That's 55% of analysts with a positive view. Most of the other analysts rate Nvidia as a "hold." However, one analyst pegged the stock as an "underperform" with another recommending selling it.
NASDAQ: NVDA
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That leaves Supermicro in the third spot. Of the six analysts surveyed by LSEG in September, only two (33%) recommended buying the stock. The other four analysts rated Supermicro as a "hold."
NASDAQ: SMCI
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The winner based on price targets
However, there is another method to assess what Wall Street thinks about stocks. While analysts make buy, hold, or sell recommendations (or their equivalents), they also issue 12-month price targets.
Using this approach, Supermicro comes out on top. The average price target for the stock reflects an upside potential of 105%. The most optimistic analyst thinks Supermicro's share price can increase by more than 3.6x.
Nvidia is again the runner-up. Wall Street's average price target for the stock is roughly 22% above the current share price. However, one especially exuberant analyst predicts Nvidia will soar 69% higher.
Broadcom was first based on analysts' buy recommendations but came in last based on price targets. The average price target for the stock reflects an upside potential of 15%. That's not bad, but it's well below the targets for Supermicro and Nvidia. The most upbeat analyst thinks Broadcom can rise another 42% or so over the next 12 months.
Controversy, concerns, and confidence
The main reason a smaller percentage of analysts recommend buying Supermicro is the controversy that recently erupted with a short-seller's allegations about accounting manipulation by the company. I suspect the 12-month price targets don't fully reflect this news yet. It's too soon to know how things will shake out. Investors might want to heed the advice of most analysts to hold Supermicro if they own it or hold off on buying it for now if they don't.
Nvidia's middle-of-the-pack rankings stem in part from Wall Street's concerns about the company's declining gross margin and the potential for a recession. I don't think investors should worry about the slipping margin. For one thing, it's still really high (75.1% in Q2). Nvidia also has its new Blackwell chips on the way, which should boost margins.
What about the possibility that the U.S. could enter a recession? I wouldn't rule it out. On the other hand, the Federal Reserve is likely to cut interest rates soon -- a move that could help prevent a recession.
I agree with analysts' overall bullishness about Nvidia and Broadcom. Both companies' businesses continue to perform well. I think investors have reasons for confidence about their growth prospects. I don't know if Nvidia or Broadcom will hit Wall Street's price targets, but I wouldn't bet against either of these stocks.
