5 reasons NVIDIA stock remains a top priority after an AI-powered rally: BofA

• Nvidia stock remains Bank of America’s “best stock” even after an AI-powered 163% year-to-date gain.
• One of the main takeaways the bank made after meeting with Nvidia’s CFO was that demand for the company’s AI chips appeared to be “sustainable.”
• These are five reasons Bank of America is confident in Nvidia’s $500 price target.

Even after Nvidia is up more than 160% year-to-date, fueled by AI, Bank of America still calls the company a “top pick” and believes the stock has more upside.

The bank has a Buy rating on Nvidia shares with a price target of $500, suggesting a 29% upside from current levels. BofA calls NVIDIA “a trailblazer in the AI ​​gold rush” as it virtually dominates the market for high-performance GPU chips that help enable generative AI chatbots like ChatGPT and Bard. .

After an investor meeting with Nvidia’s CFO and senior vice president of gaming, Bank of America analyst Vivek Arya concluded that demand for AI chips from semiconductor companies like the H100 is sustainable. , which it concluded was an encouraging sign for investors betting that generative AI would be more persistent. More powerful than Web 3.0 and the Metaverse.

According to Wednesday’s note, these are the 5 reasons Arya remains bullish on NVIDIA.

1. “Nvidia’s recent surge in data center demand was unique and sustainable, and we were reassured by the lack of evidence of pull-in or customer/regional concentration risk.”

2. “Second half will be a tailwind as more customers migrate to the latest generation/trans-optimized H100 (at 2-3x the average selling price of the previous generation A100).”

3. “Nvidia’s market share in AI inference is ample headroom because the computing requirements of large language models far exceed what traditional CPUs can handle (currently, legacy inference shares 90 and above).”

4. “The opportunity for Nvidia to expand its market from just AI accelerators (GPUs) to high-performance CPUs (Grace), data processing (Bluefield DPUs) and Mellanox InfiniBand + Ethernet networking is underestimated.”

5. “Gaming (25% of sales) will see We are on track for a sustained recovery.”

A bullish outlook for Nvidia could lead to big profits, according to the memo.

“Based on NetNet’s 65% market share in accelerators, we are even more confident that NVIDIA can sustain earnings per share above $20 over the long term,” Arya said.