Bank of America reiterated its Buy rating on Nvidia with a $350 price target, arguing the market overstates risks from the chipmaker's AI ecosystem investments. BofA estimates Nvidia has committed about $300 billion in capital support to AI partners, with the stock trading at a 34% to 50% valuation discount.
Bank of America reiterated its Buy rating on Nvidia with a $350 price target, saying the market overstates risks from its AI investments.
"Today's conditions make this worthwhile: solid GPU rental rates, compute scarcity, and NVDA's industry-leading free cash flow generation," Vivek Arya, semiconductor analyst at Bank of America, said.
Arya's conceptual sum-of-parts analysis on Nvidia's free cash flow shows the stock trades at a 34% to 50% discount even after accounting for financing risks. BofA estimates Nvidia has committed about $300 billion in capital support to AI partners, split between roughly $70 billion in equity investments and $230 billion in residual value guarantees or backstops. The $350 target implies about 60 percent upside from Tuesday's $219 close.
Shares fell 2.5 percent to $219 on Tuesday as AI-related stocks declined broadly. Nvidia is up about 18 percent this year but remains about 7 percent below its May peak. The company reports fiscal second-quarter earnings on Aug. 26.
The discount "could be overstating the risks and creating a compelling opportunity," Arya wrote. The investments also help Nvidia diversify beyond public hyperscalers building competitive custom chips, he noted.
Nvidia has deepened its reach across the AI supply chain. It recently agreed to provide up to $105 billion in credit support and residual value guarantees for SB Energy's 8-gigawatt PORTS Technology Campus in Ohio, a facility to be leased by OpenAI and run on Nvidia infrastructure. Earlier this month, Nvidia partnered with Apollo Global Management, BlackRock, Brookfield, Goldman Sachs and KKR to deploy $500 billion in private capital for AI data centers. It also disclosed a $2 billion investment in Marvell and sizable stakes in SpaceX and Intel.
The strategy carries risks. "If AI demand slows, both NVDA's growth rate and balance sheet could come under pressure," Arya wrote. He added that the "most forceful counter" to ease worries over lower earnings quality would be for Nvidia to boost investor cash returns, dedicating a greater share of free cash flow to buybacks given its 50 percent allocation sits below peers at 75 to 100 percent.
The $350 target sits above the average analyst price target of about $302. Other firms have also raised targets recently: Argus lifted its objective to $270, Benchmark to $335, Jefferies to $300 and Bank of America to $350, while Seaport Research Partners set a $180 target with a sell rating. Nvidia has a market capitalization of $5.45 trillion and trades at 34.5 times trailing earnings.
The reiteration shows BofA sees the AI buildout as durable despite financing concerns. Investors will watch Nvidia's fiscal second-quarter earnings on Aug. 26 for updated guidance on GB300 demand and the Vera Rubin ramp.
This article is for informational purposes only and does not constitute investment advice.
