Wedbush Sees M&A Boom in AI Ahead: Top 3 Acquisition Targets

The artificial intelligence (AI) arms race has entered a new phase, this time focused on mergers and acquisitions. According CNBCWedbush Securities analyst Dan Ives believes the “AI M&A floodgates” will open wide as big tech and private equity firms compete to buy their way to dominance. Ives predicts that a friendlier regulatory climate under the new administration will pave the way for an increase in deal-making in the technology sector.

Ives highlights several smaller, more specialized companies that are being snapped up by deep-pocketed giants looking to close capacity gaps. Among them, Ives highlights C3.ai (AI), Sandisk (SNDK) and Tenable Holdings (TENB) as particularly attractive.

Sandisk, valued at $18.6 billion, is a technology company best known for creating, manufacturing and distributing flash memory storage systems. They are used in various applications including smartphones, cameras, computers and data centers.

Sandisk’s reincorporation under the SNDK symbol earlier this year has been one of the most incredible comeback stories in technology. Since February, shares have risen more than 288%, driven by increased demand for high-performance data storage solutions needed for AI workloads.

AI models demand massive storage and memory capacities, and Sandisk’s next-generation flash technology can make it an attractive target for large technology companies developing or expanding AI data centers. For full fiscal 2025, Sandisk reported a 10% increase in revenue to $7.3 billion. The company also reported a profit of $2.99 ​​per share compared to a loss of $3.46 per share in fiscal 2024.

Analysts expect Sandisk’s revenue to rise 22% to $8.9 billion, and earnings to rise 119% to $6.55 per share, respectively. However, the competitive landscape remains fierce, with Micron (MU) dominating this space in both the NAND and DRAM markets. Flash memory manufacturing is capital intensive and very sensitive to price swings. Even small fluctuations in demand or supply can have a long-term impact on profitability.

Overall, Wall Street rates Sandisk stock a consensus “Moderate Buy.” Of the 18 analysts covering SNDK, 11 recommend a “Strong Buy”, six recommend a “Hold” and one suggests a “Strong Sell”. The stock has surpassed its average analyst price target of $94.28. However, the high estimated price of $150 implies an 8% upside potential over the next 12 months.

C3.ai has long been a leading name in enterprise AI. According to Ives, it could be one of the most sought-after targets in this next wave of AI M&A. The company offers software that enables companies to use AI at scale, including predictive analytics, automation, and data-driven insights in industries such as defense, energy, and manufacturing.

The stock has fallen 45% year to date (YTD) as the company faces major operational issues despite its first-mover advantage.

In the first quarter of fiscal 2026, revenue declined 19% year-over-year (YoY) to $70.3 million, signaling a worrying slowdown just as AI adoption accelerates globally. However, the main concern remains profitability. C3.ai reported a net loss of $49.8 million, or $0.37 per share, with negative free cash flow of $34.3 million. Despite having more than $711 million in cash reserves, the company continues to lose capital every quarter, raising concerns about how long it will be able to continue operations without significant improvements in efficiency or revenue momentum.

Management cited poor sales performance and internal discord as the key causes of the decline and said the company is restructuring to address its situation. Analysts predict the company will continue to lose money over the next two years, despite its expanding portfolio of more than 131 enterprise AI applications.

Ives believes C3.ai would be an attractive acquisition target for companies like Apple (AAPL), IBM (IBM), and Oracle (ORCL), all of which are looking to expand their AI infrastructure and enterprise integration capabilities.

C3.ai’s problems have not gone unnoticed on Wall Street. Overall, AI stocks are rated “Hold.” Of the 15 analysts covering the stock, three rate it a “Strong Buy”, six rate it a “Hold”, two say it is a “Moderate Sell” and four say it is a “Strong Sell”. The stock has surpassed the average price target of $16.67. The street’s high estimate of $40 implies a 110% increase over the next 12 months.

As cybersecurity becomes inseparable from AI, Tenable Holdings represents another logical acquisition opportunity. The company specializes in exposure management and vulnerability assessment, which involves helping organizations identify, measure and mitigate security threats before they are exploited.

Although Tenable stock is down 25% year to date, its strong customer base and recurring revenue model make it a reliable long-term asset.

In the second quarter, Tenable reported revenue of $247.3 million, up 12% year-over-year, and non-GAAP operating income of $47.7 million, reflecting an operating margin of 19%. Management emphasized that the company’s growth was driven by the increasing adoption of its Tenable One platform, which gives enterprises a unified view of their attack surface and allows them to manage security threats more proactively.

During the quarter, free cash flow amounted to $44.3 million. Tenable also increased its existing share repurchase program by $250 million, indicating confidence in its long-term growth prospects.

The company has also been expanding its customer base, gaining 367 new enterprise platform customers and 76 new net six-figure accounts during the quarter. Larger cybersecurity and cloud infrastructure providers may see Tenable as a way to expand their AI-powered threat detection capabilities.

Overall, Wall Street rates TENB stock a consensus “Moderate Buy.” Of the 24 analysts covering TENB, 12 recommend a “Strong Buy,” one recommends a “Moderate Buy,” and 11 rate it a “Hold.” Analysts’ average price target of $39.84 represents a potential 35% upside from current levels. Furthermore, the high estimated price of $45 implies a potential upside of 52% over the next 12 months.

On the date of publication, Sushree Mohanty had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com