Instead of placing bets on which software companies will rise to the top in artificial-intelligence-powered search, perhaps investors should look below the surface.
BofA Securities analyst Vivek Arya is upbeat about Nvidia Corp.’s
NVDA,
+3.58%
ability to capitalize on the push that companies are making to bake artificial intelligence into their offerings — a push that has become frenzied thanks to the recent success of OpenAI’s ChatGPT.
Read: AI is dominating the action in the stock market right now
“[Nvidia’s] full-stack of accelerated silicon/systems/software/developers positions it uniquely to lead the nascent generative AI arms race among global cloud and enterprise customers,” Arya wrote in a Monday note to clients.
Nvidia is a “top compute pick” for Arya, and he’s feeling even more bullish lately. He upped his price objective to $255 from $215 Monday while maintaining a buy rating, “as AI adoption potentially catalyzes long-term data center growth.”
He expects that generative AI will increase to $62 billion the total addressable market for accelerators, which can help process AI tasks more efficiently and deliver “near-instantaneous results.”
Even if you pump the brakes on the current mania around generative AI, which is the type of AI that ChatGPT represents, Nvidia still looks poised to benefit from a broader wave of interest in the category, in his view.
“Generative AI is in its requisite hype cycle and predicting its adoption pace involves lots of assumptions,” Arya wrote. “Regardless, the shift to accelerated computing, led by [Nvidia] GPU, and away from conventional CPUs is structural, with accelerator sales growing at a 42% pace in last 5 years vs just 6% for CPUs.”
Shares of Nvidia were up 2.6% in late morning trading Tuesday.
Nvidia isn’t the only potential beneficiary. Other possible winners include Synopsys Inc.
SNPS,
+3.35%
and Cadence Design Systems Inc.
CDNS,
+5.65%
in electronic design automation (EDA), as well as Marvell Technology Inc.
MRVL,
+1.64%
and Broadcom Inc.
AVGO,
-0.50%
when it comes to networking of high-bandwidth accelerated services.
“The emergence of AI could represent one of the strongest upcoming drivers for semis,” Arya wrote. “Computational requirements for running AI models are quickly changing, and so are costs related to running those models.”
