They believe that Nvidia has a potential upside of 71% despite market doubts

Bank of America (BofA) reaffirmed its buy recommendation on Nvidia and stated that the market is overestimating the main risks facing the company. According to the entity, the current valuation does not reflect the growth potential of the chip manufacturer for artificial intelligence.

The bank raised its price target for the stock to US$350, up from the closing price of US$204.12 recorded on July 8. This projection implies a potential increase of 71%.

Why Bank of America remains optimistic about Nvidia

According to Bank of America, the market is already discounting a scenario that is too negative for Nvidia's earnings. The entity estimates that the current price incorporates an implicit cut of between 30% and 35% in the expected profits for 2027 and 2028.

Analysts argue that the company continues to be a leader in infrastructure for artificial intelligence and believe that the stock is trading at an attractive level given its growth prospects.

The four risks the bank is analyzing

Bank of America identifies four factors that currently concern the market, although it believes their impact is overstated:

• The possible effect of the higher cost of HBM memory on margins.

• The competition from ASIC chips developed by large tech companies.

• The company's valuation compared to other companies in the sector.

What BofA expects about Nvidia's margins

The bank believes that the increase in the cost of HBM memory should not significantly affect Nvidia's profitability. According to its estimates, the higher cost per rack would increase by between US$200,000 and US$300,000.

At the same time, the selling price of those systems could increase by between US$2 million and US$3 million, driven by improvements in processors, networks, software, and other components. For this reason, the entity expects gross margins to remain around the mid 70% range.

Competition would not change Nvidia's leadership

The report also analyzes the progress of chips developed by companies like Google, Amazon, and Meta for their own data centers.

Nevertheless, Bank of America highlights that sales of Nvidia's GPU accelerators have multiplied by about 700 times since 2015 and that sales to large cloud service providers grew by 115% year-on-year. The entity projects that the company will maintain a market share of over 65% and 70% in the global infrastructure market for artificial intelligence.

Investments and cash generation

Another point analyzed is Nvidia's investments in companies like OpenAI, Anthropic, Intel, CoreWeave, and Marvell. According to Bank of America, these commitments total around US$65 billion.

The entity estimates that these investments will consume less than 35% of the projected free cash flow for 2026. Additionally, it projects free cash flow close to US$187 billion in 2026 and approximately US$385 billion in 2027.

What Bank of America expects for the artificial intelligence market

Bank of America projects that the global market for artificial intelligence data center systems will reach about US$1.7 trillion by 2030.

On this basis, the entity maintains its expectation that Nvidia will retain a dominant position, while the upcoming quarterly results will serve to assess the evolution of its margins, sales, and market share.