Bank of America warned against seeing Nvidia as a potential long-term pullback victim while cautioning that today’s artificial intelligence boom is altogether different from the 1990s dot-com bubble. “Unlike the ‘dot-com boom’ that was funded by risky debt-taking, genAI deployment is a mission- critical race between some of the best-funded (cloud) customers,” analyst Vivek Arya wrote to clients on Wednesday. Arya maintained his buy rating and top pick designation on the maker of AI processors, viewed as the biggest winner of the AI mania that’s consumed investors since late 2022. His $150 price target implies another 15% upside over the next 12 months versus the price at which Nvidia was trading midday Thursday, building on this year’s gain of 165% and last year’s 239% advance. Arya said Nvidia’s vertical rally in the second quarter — up 45% since March 31 — compared with the broader market —the S & P 500 is up 4% — could make Jensen Huang’s company vulnerable to short-term profit-taking. Nvidia briefly rallied 3.8% on Thursday, helping send the S & P 500 above 5,500 for the first time, only to later retreat as much as 3.8%. But Arya said any volatility should be short-lived. Beyond the AI spending being considered legit, he noted that hardware deployments in the space are only in the second of what could be a three- to five-year development cycle. That could amount to an eventual $300 billion-a-year opportunity, about three times the current rate. Additionally, Arya pointed to demand among cloud customers for Nvidia’s new Blackwell AI accelerator systems. The analyst said on-premise enterprise and sovereign AI demand as well as software monetization is 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 have just not seen before,” Arya said of generative AI on CNBC’s “Squawk Box” Thursday morning. “AI is giving us that next opportunity to upgrade the infrastructure using this new form of accelerated computing. So, I do think it’s … structurally a new tool.” When all is said and done, Arya said that Nvidia’s valuation is still “compelling.” He said it sells for just 35 to 40 times the consensus and has a price-earnings multiple of just around 30 times when considering the bull case for earnings per share.
