It’s the nature of investing to look for the ‘next new thing,’ the company or technology or product that will bring the next sea-change to its industry – and with it, windfall profits. A look at history will show that these developments are often unpredictable, but they can be recognized early. The advent of digital tech in the late 90s provides a good example of the possible gains and risks. The survivors of the dot.com bubble have prospered mightily.
Now, artificial intelligence – AI, or machine learning – is poised to take the digital world to its next frontier. With applications in virtually every facet of the tech industry, from smartphones to robotics to data analytics, AI is going to change the way we interact with machines, with applications, and perhaps even with each other. The possibilities in this are endless, limited only to human imagination.
For investors, this means that new opportunities are going to open up, as companies move to capitalize on AI through product creation, programming, hardware development – and perhaps AI’s biggest impact hasn’t been built yet.
For now, however, we can look for firms that already have their hands in AI, either in their own work or in their products. We’ve taken two of these names and looked up their details in the TipRanks database. Both are Strong Buys, according to the Street’s analysts, with plenty of upside potential in store for 2022. Let's take a closer look.
One Stop Systems (OSS)
We’ll start with One Stop Systems, a provider of the high performance computers (HPCs) used in the highest-end data centers and data storage facilities. The company specifically markets its products for AI applications, offering portable, ruggedized servers and storage for ‘AI on the Fly.’ The company draws its customers from a wide range of sectors, including telecom, manufacturing, and defense. One Stop’s systems are used in both rack-scale multi-HPC server complexes, and in smaller, single-HPC servers.
This past November, OSS released a new product for AI Transportable solutions. The Rigel Edge Supercomputer brings higher performance to compact deployments, using Nvidia’s HGX A100 4-GPU platform to power GPU-accelerated computing. The system is air-cooled, and only 25.6 inches in total depth. The company is also working on release of an even more compact, liquid-cooled, version of the Rigel.
New products and a solid reputation for compact, transportable AI systems have worked together to bring OSS strong financial results. In the most recently reported quarter, 4Q21, the company had $17.8 million in total revenue, up 11% sequentially and 28% year-over-year. For the full year, the top line of $62 million was a company record – and up 19% from 2020. Full year non-GAAP EPS came in at 16 cents per share, double the 2020 net EPS. Looking ahead, One Stop is guiding toward 26% y/y revenue growth in 1Q22.
In coverage for Roth Capital, 5-star analyst Scott Searle points out the company’s strong guidance, as well as its moves toward the autonomous vehicle market, a growing frontier for AI.
“Appropriately overshadowing 4Q21 results is the upwardly revised 1Q22 outlook (up 26% y/y) which features a growing opportunity pipeline around AI transportables and autonomous vehicle applications which could open a $500M+ TAM in 2023... With high level engagements at multiple autonomous vehicle trucking and fleet applications we believe this could drive an inflection in the 2023-time frame beyond our upwardly revised expectations of 12.8% growth. Overall, we view this opportunity as potentially transformative for OSS... We are raising our sales estimates and would be buyers of this stealth AI and autonomous vehicle microcap,” Searle wrote.
In line with these comments, the analyst gives One Stop’s shares a Buy rating, along with a $9 price target that implies a strong upside of ~131% for the next 12 months. (To watch Searle’s track record, click here)
Overall, with 3 Buys and no Holds or Sells assigned in the last three months, the word on the Street is that OSS is a Strong Buy. The stock is selling for $3.90 per share, and its $8 average price target indicates a 105% upside by year’s end. (See OSS stock forecast on TipRanks)
Nvidia Corporation (NVDA)
The second stock we’ll look at needs no introduction. Nvidia, with a market cap of more than $600 billion and an 80%-plus market share in the GPU segment, is a dominant player in the gaming and data center sectors. The company’s GPU chips are in high demand, due to their computing capacity – which is capable of powering AI systems.
Nvidia is deeply involved with AI companies and applications, supplying high-end GPU AI-capable semiconductors to companies involved in data centers, autonomous vehicles, intelligent factory robots, cloud computing – even ordinary desktop systems are coming with AI capabilities installed. The company provides deep learning chips to power cloud services from major names like Amazon, Google, IBM, and Microsoft.
The company’s recent history, of 7 consecutive quarters showing sequential gains in both earnings and revenue, may help explain why analysts find the stock so compelling. The company’s 4Q21 EPS, at $1.32, beat the forecast (of $1.23) and rose 69% year-over-year, while the 4Q revenue grew 53% y/y, to reach $7.64 billion.
Matt Ramsay, 5-star analyst from Cowen, is unabashedly bullish on Nvidia, writing: “AI computing opportunities are inflecting across essentially all vertical industries, lead by datacenter, enterprise, gaming, edge, auto, simulation... ultimately monetized through hardware and now vertical-specific software... We view NVIDIA as the premier AI-driven growth story in semis and possibly the tech industry."
Ramsay uses these comments, as part of an in-depth look at NVDA, to support his Outperform (i.e. Buy) rating on the stock. His price target, of $350, suggests ~45% in store for the chip giant. (To watch Ramsay’s track record, click here)
In recent weeks, no fewer than 26 Wall Street analysts have weighed in on this stock – giving it 21 Buys and 5 Holds, for a Strong Buy consensus rating. The shares are selling for $242.08 and their $351.74 nearly matches Ramsay’s objective, for a 45% one-year upside potential. (See NVDA stock forecast on TipRanks)
To find good ideas for AI stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Anyone who's been stuck in a traffic jam for any length of time appreciates the value of the autonomous vehicle. Communications company leader Qualcomm (QCOM) is part of the drive to get us there.
That drive just got a little easier thanks to a new acquisition the company's making. Between its current line of smartphone-heavy business, and its new potential push into driverless cars, the end result is reason to be bullish on Qualcomm.
The last year for Qualcomm has featured a major upward thrust followed by a slow decline to more “normal” levels. From April 2021 to nearly November, the company held to a fairly tight range between $120 and $150 per share. November saw a substantial upward spike that proved unsustainable, and now the company is back around the $140 range once more.
The latest news might get Qualcomm back up past those spike levels. The company concluded its efforts to acquire Arriver, the self-driving vehicle arm of Veoneer. With Arriver in its fold, Qualcomm will be better able to compete against Intel's (INTC) Mobileye, currently regarded as a leader in the industry.
Wall Street's TakeTurning to Wall Street, Qualcomm has a Moderate Buy consensus rating. That's based on 12 Buys and five Holds assigned in the past three months. The average Qualcomm price target of $216.88 implies 55.7% upside potential.
Analyst price targets range from a low of $185 per share to a high of $250 per share.
Hedge Funds Losing Faith, but Dividends Inspire HopeRight now, hedge funds are significantly less interested in Qualcomm than they once were. The word from the TipRanks 13-F Tracker shows that, once more, hedge funds have reduced their stake in Qualcomm by about two million shares last quarter.
This is a return to form for hedge fund appraisal of Qualcomm; hedge funds had sold shares in Qualcomm from March 2020 straight on to June 2021. The first increase in hedge fund stakes took place in September 2021, but December 2021's departure saw a further reduction in stake.
However, for income investors, Qualcomm offers a welcome dividend. Qualcomm's dividend history shows just what dividend stock investors like to see: a dividend that regularly increases, and has been doing so over the last four years.
Even during 2020 and the worst of the COVID-19 restrictions, Qualcomm maintained, and even raised, its dividend.
Qualcomm Needs HelpGranted, the autonomous vehicle market has been rough for its entrants in the last few years. Even Elon Musk noted that actually getting an autonomous vehicle to market was a “hard problem.”
Given the sheer range and extent of the problems Tesla (TSLA) has seen in that vein, it's not surprising that actually getting such a car out is proving a taller order than most expect.
Worse yet for Qualcomm, there are signs that smartphones aren't quite as ubiquitous as they once were. The “dumbphone” is making something of a comeback. “Dumbphones” are basically the cell phones that most had back in the 2000 to around 2010 range.
Dumbphone sales were on track to hit one billion units in 2021, up from just 400 million in 2019. With smartphone sales on the decline, that could mean some trouble for Qualcomm sales going forward.
With that in mind, it's little surprise that Qualcomm would work to branch out. While the smartphone trade is unlikely to go away, potential weakness therein might prove a limiting factor. If Qualcomm can make good on self-driving cars, having a piece of that market would likely easily make up for smartphone losses.
While Qualcomm will likely have the same level of problem that Musk and Tesla had with self-driving vehicles, Qualcomm is advancing in this field. Qualcomm already had Snapdragon Ride, and Arriver was using Snapdragon Ride chips in its operations for the last several years.
By way of comparison, Nvidia (NVDA) has around $11 billion worth of sales pipeline operations for its DRIVE autonomous vehicle platform. Since Nvidia focuses mainly on premium cars, that leaves a whole range of budget models open for the Qualcomm platform.
Concluding ViewsQualcomm is branching out, and that's good news for investors. While the exact value of the self-driving car market may be limited until the potential sales pipelines become actual sales numbers, having a stake in a market that most will likely eagerly get in on is worth doing.
Better yet, the numbers look great for Qualcomm as well. With Qualcomm trading significantly under its lowest price targets, there's plenty of upside potential.
So Qualcomm has a solid position in a currently solid market -- smartphones -- but also a potentially sound position in a market that will be solid in the future in self-driving cars. That combination makes for a stock worth being bullish about.
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