BofA Global Research says Nvidia's valuation is the cheapest it has been in ten years, even as the chipmaker heads into a multi-quarter upgrade cycle. The brokerage expects Nvidia to beat its own revenue guidance and pushed back on investor worries over memory costs and its equity stakes in AI partners.
BofA Global Research expects Nvidia to report fiscal second-quarter revenue of $94 billion to $95 billion, exceeding its own guidance of $91 billion, as shipments of its next-generation Vera Rubin chips begin a multi-quarter upgrade cycle. The brokerage projects third-quarter sales of $107 billion to $108 billion, well above the roughly $104 billion Wall Street consensus, with Nvidia due to report results after the close on Wednesday, Aug. 26.
Cheapest valuation in a decade
BofA maintained its Buy rating on Nvidia, calling it its top sector pick. The brokerage set a $350 price objective on the stock. Nvidia now trades at 16 times its projected 2027 earnings per share — the lowest forward price-to-earnings multiple in ten years.
Memory inflation risk 'overblown'
Wall Street has grown cautious over two pressure points: rising component costs squeezing hardware margins, and circular vendor-financing deals where chipmakers fund their own customers. BofA pushed back on both, arguing memory cost headwinds on upcoming Vera Rubin systems are limited to roughly 60 basis points.
DRAM prices have climbed across the chip supply chain, with memory now 40% to 50% of total build costs, compared with 15% to 20% historically. BofA said Nvidia is insulated by its dynamic pricing power, preferential sourcing with SK Hynix, and the high selling prices of its rack-scale systems.
On its NVL compute racks, HBM and LPDDR memory are estimated at 12.7% of total rack price on Vera Rubin, a margin headwind of about 60 basis points versus current Blackwell Ultra systems. Full pod-level integration could cut gross margin by up to 500 basis points because of LPDDR and NAND storage costs, though BofA expects the initial volume of full-system pods to stay small. Overall, the brokerage projects gross margins to stabilize between 73% and 74%, down from about 75% today.
Equity bets and a dominant market share
Nvidia has committed about $70 billion in direct equity to ecosystem partners, including $30 billion in OpenAI and up to $10 billion in Anthropic, BofA calculated. BofA expects Nvidia to generate $469 billion in free cash flow across 2026 and 2027. That leaves room to fulfill its pledge of returning 50% of free cash flow to shareholders.
A reported $250 billion backstop for OpenAI's lease of SoftBank Energy's 10-gigawatt Ohio campus is a contingent, back-ended guarantee rather than an upfront capital outlay, BofA said, structured similarly to standard project finance deals. Spot GPU rental prices are near record highs, reaching $5.66 per hour for B200 chips.
BofA expects Nvidia to keep a 65% to 70% share of the broader AI accelerator market through 2030. The brokerage projects Nvidia's annual earnings power to reach $25-plus per share by 2030.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
