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.