Is Nvidia A Software Play? What This Analyst Sees As 'Software-Only Monetization Opportunities'

Nvidia Corporation NVDA held its GTC 2022 earlier this month, where it announced a slew of products and services. An analyst at Wells Fargo Securities singled out the company's pivot to software as a key takeaway.

The Nvidia Analyst: Aaron Rakers has an Overweight rating and a $370 price target for Nvidia shares, suggesting a roughly 33.6% upside from current levels.

The Nvidia Thesis: Eos, the next-gen AI-optimized supercomputer Nvidia announced, is impressive in terms of size and performance, analyst Rakers said. The analyst expects the company to use it for different AI-optimized workloads.

Nvidia's Eos, according to Rakers, will likely play a significant role in the company's development as an autonomous vehicle platform provider. This opportunity is not fully appreciated, he added.

"We think NVIDIA's position as the creator of the DRIVE software capabilities is why it believes it could capture a significant portion (up to 50%?) of the economics of the automotive industries drive toward connected subscription services / OTA software functionality," Rakers said.

Related Link: 5 Nvidia Analysts On AI Inflection, A $1-Trillion Opportunity, Silicon-Software Split And Sky-High Valuation

The analyst noted that the company has announced two key full-stack DRIVE platform customers, namely Mercedes-Benz Group AG DDAIF and Tata Motors Limited ADR TTM-owned Jaguar Land Rover, leveraging Nvidia Drive Hyperion 8.

At the GTC 2022, Nvidia outlined an $11 billion, six-year pipeline of auto design wins, including those at 20 of the top 30 global vehicle OEMs, the analyst said. The increasing adoption is premised on the full production of the DRIVE Orin SoCs in 2022, he added.

Orin SoC content could be in the range of $250 to $300 per vehicle, the analyst said.

"We see Hyperion adoption, along with NVIDIA's development of AV software platforms via its new Eos supercomputer, as the drivers of software-only monetization opportunities looking into 2024+ timeframe," Wells Fargo said.

NVDA Price Action per Benzinga Pro: At last check Thursday morning, Nvidia shares were up 1.17% at $280.12.