Why Nvidia Is Needham's Top AI/ML Stock Pick For 2022


Semiconductor stocks outperformed the broader technology sector for a third year running in 2021, and entering 2022, mega-trends such as the adoption of artificial intelligence and machine learning, next-gen automotive and mobility, electrification and proliferation of low-power intelligent devices on the edge will likely drive further semiconductor content, according to a Needham analyst. 

The Nvidia Analyst: Rajvindra Gill named Nvidia Corporation NVDA as his top AI/ML pickup for 2022.
The analyst has a Buy rating on Nvidia shares and $400 price target, suggesting over 40% upside from current levels.

The Nvidia Thesis: Nvidia has seen significant growth in both its Gaming and Data Center business thanks to growing adoption of new "RTX" capable GPUs by gamers and proliferation of AI workloads and ML in Data Centers, analyst Gill said in a note.

Only 25% of the current 250 million GeForce installed base is RTX-enabled, suggesting a lengthy upgrade cycle ahead and more Gaming upside, the analyst said.

Related Link: Why Nvidia Analysts Reaffirm Bullish Stance And Hike Price Targets Following Blowout Quarter; 'Path to $1 Trillion Club Evident'

Data Center, according to the analyst, is being driven by the growth of Inference, as GPU acceleration continues to proliferate in servers, with more processors moving to the Ampere architecture. As of now, only 10% of the servers are accelerated, he added. The analyst estimates total addressable market opportunity of $100 billion for Data Center.

New platforms such as Omniverse, which presents a $100-billion TAM, increase the scope for GPU acceleration and drive Nvidia's already impressive free cash flow growth, Gill said.

NVDA Price Action: Nvidia shares were down 2.35% at $275.16 Friday morning. 

Related Link: 8 Stock Picks To Play The 2022 Emerging Trends Shaping The Semiconductor Industry

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