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Microsoft's Monetization Potential, Nvidia's Nascent Monetization And Investment In ChatGPT Make Them Analyst Top Picks
Needham views OpenAI's technology innovations, the progression of generative/conversational AI, and Microsoft Corp $Microsoft (MSFT.US)$ Bing AI as broadly transformative and a productivity, cost-cutting, and efficiency tool versus a revenue-generating tool today as it pertains to most industries.
Within U.S. Software, MSFT is Needham's Top Pick following an extensive assessment of MSFT's potential paths of monetization.
Needham found that MSFT has a path to generating ~$40 billion of revenue uplift for MSFT and over $2 of EPS potential, likely over 5+ years, from monetizing OpenAI's technology in MSFT's productivity suite and premium GPT-integrated offerings.
Needham anticipates additional upside from Bing AI and other potential revenue streams not included in the $2+ EPS figure.
Nvidia Corp $NVIDIA (NVDA.US)$ Graphic Processing Unit (GPU) leads the market for training, with ~95-100% share. In addition, while most inference workloads today run on CPU, those workloads are increasingly run on NVDA GPUs due to superior performance and will become a further growth driver.
Shorter term, Needham believes the H100 and NVDA's entry into CPU will be catalysts this year.
Needham thinks NVDA's considerable investment in software represents the competitive moat that continues their lead, and the monetization of that software which has only just begun, represents yet another catalyst.
NVDA remains Needham's Top Pick in U.S. Semis due to the AI opportunity. The analysts included Sami Badri, Randy Abrams, CFA Chris Caso, Shannon Cross, Stephen Ju, and more.
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