Bank of America reinforced its bullish stance on NVIDIA (NVDA) in a note Wednesday, calling it a "top sector pick" and maintaining a Buy rating and price target of $1,500 per share.
BofA cites a recent meeting with Nvidia (NASDAQ:NVDA) executives who emphasized "very positive" demand and a growing customer base limited only by supply constraints. The firm sees Nvidia as "NVDA best positioned to enabling the $3 trillion IT industry towards delivering AI services."
The bank sees Nvidia as uniquely positioned to capitalize on the booming $3 trillion AI services market. "We see NVDA with a multi-year lead in performance, pipeline (Blackwell, successors), incumbency, scale and developer support," says the BofA note, highlighting Nvidia's advantages over competitors like AMD and Intel.
Despite its high valuation, BofA believes Nvidia's stock price has room to grow. The firm's analysts point out Nvidia's P/E ratio sits below its historical average and the broader market, while its PEG ratio is well below 1, indicating strong potential for earnings growth to outpace its stock price.
Furthermore, the bank is confident Nvidia's customers are making strategic investments in AI, avoiding duplicate orders. Large capex required for generative AI deployments and extensive upfront planning mitigate the risk of double ordering, according to BofA.
The bank also sees strength in enterprise segments like autos (Tesla) and recommender engines (Meta), alongside continued growth in cloud data centers.
Looking ahead, BofA expects a "meaningful" attachment rate for Nvidia's Grace server CPU with its next-generation Blackwell GPUs. They also see Nvidia's Ethernet Spectrum-X switch gaining traction due to its advanced features, potentially impacting market share held by companies like Avago.
Finally, BofA highlights Nvidia's robust R&D pipeline, with "3 architecture teams working in parallel."
By Sam Boughedda