These stocks are poised to benefit as cars become more and more like tech devices, presenting a big opportunity for technology suppliers, according to Citi. Analyst Arthur Lai said in a recent note that tech sales to the auto industry are likely to exceed sales to producers of smartphones, computers, tablets and wearables combined in as little as four years. The auto electric and software markets could be worth a combined $362 billion by 2025, according to McKinsey. "Transformed from a mere passenger vehicle into a moving mass of advanced electronics, complete with infotainment hub, the smart car will dramatically expand the addressable market for tech companies after saturation of the mobile economy," Lai said in the note. "Smart-car adoption will be highly, if not exclusively, leveraged to rapidly rising penetration by electric vehicles, providing a high-growth opportunity for the tech supply chain." Predicting winners in original equipment manufacturers would be premature, Lai said, but the firm identified computing hardware, sensors and software and services as the segments it thinks stand to benefit the most. Here are five of its top picks: Among the stocks is the chipmaker Nvidia , whose in-vehicle computer platform is seeing wide adoption across the country, according to Citi. Nvidia's existing wins in the auto industry is set to ramp up in the next few years and drive an inflection in revenue. "With software content potentially in thousands of dollars per vehicle, this could be a multi-billion revenue opportunity" for Nvidia as well as Mercedes, the Citi note said. Mercedez-Benz which has partnered with the software company to enable in-vehicle computing and automated driving across its next-gen fleet, which it will begin rolling out in 2024. "There are 100 million cars sold each year globally and over time we believe all vehicles will be autonomous, software defined and upgradeable," according to Citi. "We see the potential of similar deals with other automakers." The firm noted that the auto industry represents some $8 billion in revenue for the semiconductor company KLA , or 5-10% of its sales. The company's management expects near term growth of 40-50%, the note said. Citi has a $398 price target on the stock. For Cree , the maker of LED and semiconductors, auto represents less than 5% of total sales, but Citi sees it as the largest growth opportunity. Citi's price target on Cree is $110. Citi said it sees Corning , a tech company that specializes in glass, as a longer-term beneficiary. Its price target is $50. "Auto exterior remains a limited opportunity thus far with traction in a few very high end cars," Citi said. "Looking even further out, Corning sees future innovations in lighting and sensors to drive an incremental $30 content per car, bringing the potential total content in car opportunity to ~$100/car."
Nvidia CEO Jensen Huang wearing his usual leather jacket.
These stocks are poised to benefit as cars become more and more like tech devices, presenting a big opportunity for technology suppliers, according to Citi.