One of the areas where AI can have a transformative effect is in the healthcare industry. And one of the companies that can use this shift to its advantage is Nvidia (NASDAQ:NVDA).
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
According to management, the healthcare industry’s digital transformation represents one of the tech world’s biggest opportunities.
Matthew Ramsay, an analyst ranked 8th among thousands of Street stock professionals at TD Cowen, highlights that after discussions with Nvidia’s VP of Healthcare, Kimberly Powell, the chip giant estimates that the healthcare sector already contributes more than $1 billion in revenue (both direct and indirect). Moreover, Nvidia believes that over time, this market represents an opportunity worth tens of billions of dollars.
“While this computing TAM would obviously not all accrue to NVIDIA,” the 5-star analyst went on to say, “in our view the company is extremely well-positioned to capture significant value over time as both R&D and CapEx dollars in the massive global healthcare industry migrate toward generative AI computing.”
The company has identified three key areas driving its healthcare opportunities over the medium-term. Firstly, in drug discovery, there’s a potential shift towards increased computational spending, with the company estimating that annual spending of around $250 billion could move toward these endeavors. Secondly, there’s early-stage utilization of AI in medical tools and equipment, such as diagnostic imaging, minimally invasive surgery, robotic surgery, and genomic sequencing, highlighting AI’s considerable potential. Lastly, Nvidia sees the value of AI-driven assistants in both capturing medical data, thus easing the workload of healthcare professionals, and accessing this data to enhance patient outcomes, utilizing technologies like retrieval augmented generation (RAG).
Looking at the bigger picture, Ramsey thinks Nvidia’s strategy in the healthcare sector is representative of how it operates across more than 20 industries, each benefiting from the company’s tailored AI software stacks. NVIDIA adopts a comprehensive approach to optimization, developing complete solutions from hardware to software, before breaking down these solutions “to go to market.”
As for the stock, it might be valued rather at the high-end, but according to Ramsey, given its standing, it is deserving of its status. “While valuation is above core semis, the suite of superior technology, long pedigree of innovation, and extensive growth-oriented investments should allow for strong, sustained, above-peer growth across a widening set of verticals – healthcare certainly included,” the analyst summed up.
As such, Ramsay reiterated an Outperform (i.e., Buy) rating on the shares, along with a $900 price target. That said, given NVDA’s ongoing strong performance, that figure suggests the stock will remain rangebound for the time being. (To watch Ramsay’s track record, click here)
It’s a similar story amongst Ramsay’s colleagues; almost all remain on board with the stock’s Strong Buy consensus rating based on 39 Buys vs. just 2 Holds. However, the $905.74 average target implies shares are more or less fully valued. It will be interesting to see whether the analysts upgrade their targets as NVDA continues its upward march. (See Nvidia stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.
