Analysts argue Nvidia’s valuation undervalues its long-term AI leadership despite near-term margin pressures.
Bank of America reiterated its Buy rating on Nvidia, citing the company’s ability to maintain a 65% to 70% share of AI capital expenditure. Analysts noted current valuation levels reflect excessive caution, with shares trading at 18 times forward earnings, a seven-year low.
The firm addressed investor concerns over gross margin pressure, custom AI chip competition, and concentrated ownership. It argued that Nvidia’s growth opportunity justifies a higher valuation compared to other large tech firms, despite rising high-bandwidth memory costs.
Bank of America estimated HBM costs per rack could rise by $200,000 to $300,000 from Blackwell to Rubin, while rack pricing may increase by $2 million to $3 million due to upgrades in computing, networking, and software.