Two artificial intelligence (AI) stocks have led the S&P 500 (SNPINDEX: ^GSPC) higher this year. Semiconductor company Nvidia (NASDAQ: NVDA) and server manufacturer Super Micro Computer (NASDAQ: SMCI) have see their share prices surge 159% and 119%, respectively.

Both companies recently announced 10-for-1 stock splits to make shares more affordable. Nvidia completed its split in June, and Super Micro Computer will follow suit in late September. But Wall Street analysts expect both stocks to move even higher over the next 12 months.

Nvidia’s median target of $140 per share implies 10% upside from its current share price of $127. And Super Micro’s median target of $693 per share implies 16% upside from its current share price of $600. But I think Super Micro stock will soar 100% in the next year, achieving a split-adjusted share price of $120 by August 2025.

That said, patient investors should consider buying both stocks.

Nvidia: Delayed Blackwell shipments create uncertainty ahead of earnings

Nvidia reported stellar financial results in the first quarter, crushing estimates on the top and bottom lines. Revenue rose 262% to $26 billion and non-GAAP net income climbed 461% to $6.12 per diluted share. CEO Jensen Huang said, “Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform.”

However, shipments of Nvidia’s Blackwell GPUs will be delayed three months due to a design flaw “discovered unusually late in the production process,” according to The Information. Blackwell chips can run training and inference workloads more quickly than the previous Hopper generation, which should further cement Nvidia’s leadership position in AI chips.

Following the report, Nvidia shares slipped to their lowest level since May, but the stock has since rebounded, suggesting the market sees little reason to worry. Indeed, Deutsche Bank analyst Ross Seymore doubts the delayed launch of Blackwell will have a material impact on the Nvidia’s near-term outlook or its ability to achieve Wall Street estimates.

However, investors should proceed cautiously. Management has yet to address the issue, so it represents an unknown that demands explanation when the company reports earnings on Aug. 28. Expectations are already high given that Nvidia has crushed Wall Street estimates in recent quarters, so bad news could cause the stock to decline sharply.

Looking ahead, Wall Street expects Nvidia’s earnings to grow at 37% annually over the next three year. That makes the current valuation of 75 times earnings look a little pricey, though not absurdly expensive. Patient investors can buy a very small position today, provided they are comfortable with the possibility of a post-earnings decline. In that scenario, investors should consider buying a slightly larger position on the pullback.

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Super Micro Computer: The market leader in AI servers is expected to gain share

Super Micro Computer designs servers and storage solutions for cloud and private data centers. Internal manufacturing capabilities and a unique building-block approach to product development allow the company to rapidly build servers with the latest chips from suppliers like Nvidia. As a result, Super Micro typically beats competitors to market by two to six months, according to CEO Charlies Liang.

That advantage has made Super Micro the leader in artificial intelligence (AI) servers, and analysts expect the company to gain share quickly. Bank of America analysts expect Super Micro to account for 17% of AI server sales by 2026, up from 10% last year. Tom Blakely at KeyBanc is more bullish. He thinks Super Micro’s market share could top 20% this year. He also says the company has “competitive moats that should sustain if not expand this share in coming years.”

Supermicro reported mixed financial results in the fourth quarter of fiscal 2024 (ended June 30). Revenue surged 143% to $5.3 billion on record demand for AI infrastructure. However, gross margin contracted 5.8 percentage points to 11.2% and non-GAAP net income climbed just 78% to $6.25 per diluted share. Wall Street expected non-GAAP earnings to increase 130% to $8.14 per diluted share.

The stock plunged following the report, reflecting concerns that margins contracted because Super Micro lacks pricing power in an increasingly competitive market. But CEO Charles Liang attributed the margin crunch to costs associated with direct liquid cooling (DLC) components. Moreover, he expects gross margin to normalize between 14% and 17% by the end of fiscal 2025 (ends June 2025) as DLC servers begin shipping in higher volume.

Importantly, investments in DLC technology could reinforce Super Micro’s position as the market leader in AI servers. Liquid cooling is more cost effective than traditional air cooling, so demand for DLC servers is expected to grow rapidly in the coming years as data centers are filled with powerful AI hardware generating tremendous amounts of heat. Super Micro has positioned itself as an early leader in DLC technology.

Looking ahead, Super Micro’s guidance for fiscal 2025 implies revenue growth between 74% and 101%. If the company hits the high end of that range, its share price could increase 100% without any change in the price-to-sales ratio. And the stock currently trades at 2.5 times sales, which is a discount to the 12-month average of 3.3 times sales. That’s why I believe Super Micro stock will double by August 2025.

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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Prediction: 1 Stock-Split AI Stock to Buy Before It Soars 100% in the Next Year (Hint: Not Nvidia) was originally published by The Motley Fool