Bank of America names Nvidia a top pick as the valuation in chip stocks becomes more attractive

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Analysts believe that Nvidia services the most 'resilient' themes, such as cloud computing and artificial intelligence.

The case to buy Nvidia just got even more compelling, according to Bank of America. Analyst Vivek Arya named Nvidia a top pick, saying in a Tuesday note that chip stocks are already pricing in a recession, even as they generate better free cash flow margins than stocks in the broad market index.

Additionally, Bank of America believes that Nvidia services the most "resilient" industries, including cloud computing and artificial intelligence, industrial, electric vehicle and driverless technology sectors. "In prior times, only a single end-market, say PCs or smartphones would drive semis. Now there are multiple end-markets served by a consolidated set of chip vendors, delivering proprietary products and generating solid FCF margins," Arya wrote.

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