According to Bank of America, Nvidia stock still has a "compelling valuation" and has the potential for a 23% increase from its current levels. The bank has increased its price target for Nvidia to $800 from $700, citing the fact that AI demand is still in its early stages.
This news comes after Nvidia's stock has already experienced a significant rally of 350% since the beginning of 2023. Despite this growth, Bank of America believes that there is still room for further upside.
Bank of America analyst Vivek Arya highlights the positive results from top US cloud customers as evidence of solid motivation for spending in the field of AI. This suggests that there is a strong demand for Nvidia's GPU chips, which are essential for AI technologies.
While mega-cap tech giants like Meta Platforms, Microsoft, Amazon, and Alphabet are leading the way in AI spending, there are many other companies that are just starting to implement their AI strategies. This is expected to generate further demand for Nvidia's AI offerings in the coming years.
Arya also predicts that Nvidia will deliver a measured revenue beat and solid earnings growth in its upcoming earnings report. In the long term, he sees Nvidia generating over $40 in earnings per share power.
Nvidia's dominance in the market is a key factor contributing to its earnings power. Arya estimates that the company holds a 90% share of the AI training market and over 50% share of the AI inference market. Additionally, Nvidia's wide range of offerings across various price points ensures that it covers all segments of the compute market.
Overall, Bank of America's analysis suggests that Nvidia stock remains attractive for investors due to its valuation and the growing demand for AI technologies.