Nvidia is the 'picks and shovels leader in the AI gold rush' that could expand its market share as competition heats up, Bank of America says

• Nvidia is one of the biggest beneficiaries of the AI race that is starting to heat up, according to Bank of America.
• The bank said Nvidia offers investors exposure to the AI market like picks and shovels did during the gold rush.
• Nvidia offers a turnkey model "which is what we believe can enable NVDA to maintain and possibly expand its AI market share," BofA said.

Instead of trying to pick a winner in the artificial intelligence race, why not just buy the company that will be supplying all AI competitors with the necessary hardware?

That's the idea behind a recent note from Bank of America, which said Nvidia is well positioned to monetize the AI race that's heating up between Microsoft and Alphabet — no matter which company ultimately reigns supreme.

Nvidia is the "picks and shovels leader in the AI gold rush," BofA said, referencing the idea that merchants who sold supplies during the 1850s gold rush did better than the actual gold miners.

Nvidia sells AI accelerator graphics processing units, which help power the large language models that are behind the conversational AI chatbots like ChatGPT and Bard.

According to the note, the total addressable market for these chips could grow to $60 billion by 2027, and Nvidia currently dominates about 75% of the market.

The semiconductor company's H100 accelerator has surged in demand in recent months, so much so that they're currently selling on eBay for upwards of $45,000 per chip.

And while the scarcity of Nvidia's highly sought after H100 chip is bound to bring more competitors to the market, Nvidia is well positioned to fend off potential market share grabbers.

"We remind investors that success in AI requires full-stack computing and scale/experience across silicon, software, application libraries, developers plus enterprise and public cloud incumbency. In other words, it's a 10+ year well-honed turnkey model versus piecemeal silicon-only solutions from many competitors," BofA said.

That's why the bank believes Nvidia can "maintain and possibly expand its AI market share."

BofA called Nvidia a "top pick" and recommended investors buy the stock, reiterating its $340 price target, which represents potential upside of 19% from current levels.