Bank of America cautioned against viewing Nvidia as a victim of a long-term downturn, while cautioning that the current artificial intelligence boom is nothing like the dot-com bubble of the 1990s. “Unlike the ‘dot-com boom’ funded by risky debt, the genAI deployment is a mission-critical race among the most well-funded (cloud) customers,” analyst Vivek Arya wrote to clients on Wednesday. Arya maintained his buy rating and top pick designation for the AI processor maker, which he sees as the biggest winner in the AI boom that has captivated investors since the second half of 2022. His $150 price target implies an additional 15% upside over the next 12 months compared to where Nvidia was trading at midday Thursday, outpacing its 165% gain this year and its 239% gain last year.Arya said Nvidia’s sharp rise in the second quarter (45% since March 31) compared with the overall market (S&P 500 up 4%) could make Jensen Huang’s company vulnerable to short-term profit-taking. Nvidia briefly rose 3.8% on Thursday, propelling the S&P 500 above 5,500 for the first time, but then fell 3.8%. But Arya said any volatility should be short-lived. In addition to AI spending being seen as legitimate, he noted that hardware deployment in the space is only the second phase of a three-to-five-year development cycle. This could eventually become a $300 billion annual opportunity, about three times the current rate. Additionally, Arya noted demand for Nvidia’s new Blackwell AI accelerator systems among cloud customers. The analyst said demand for on-premise enterprise and sovereign AI, as well as software monetization, are still in the “early stages.” NVDA YTD Mountain NVIDIA, Year to Date “I think it has the power to transform a lot of industries in ways we’ve never seen before,” Arya said of generative AI on CNBC’s “Squawk Box” Thursday morning. “AI gives us the next opportunity to upgrade our infrastructure with this new form of accelerated computing, so I think it’s a structurally new tool.” Ultimately, Arya said, Nvidia’s valuation remains “attractive.” He said Nvidia’s stock is trading at 35 to 40 times consensus, and when you factor in the bull case for earnings per share, the price-to-earnings ratio is only around 30 times.
This isn’t a 1990s bubble, NVIDIA is still a buy, says Bank of America
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