On Thursday, BofA Securities reaffirmed its confidence in NVIDIA (NASDAQ: NVDA), raising the price target on the stock to $190 from $165 while maintaining a Buy rating. The firm's analyst cited several key factors that underpin the positive outlook for NVIDIA, a leading name in the artificial intelligence space.
The analyst's endorsement comes on the back of a comprehensive review of the company's market position and future earnings potential. The revised price target is supported by an increase in the projected earnings per share (EPS) for fiscal years 2025 and 2026 by 13% to 20%. Despite the increase, the price target is based on an unchanged forward price-to-earnings (PE) ratio of 42 times for the calendar year 2025.
NVIDIA's dominance in the market, with an 80-85% market share, and the vast total addressable market (TAM) of over $400 billion, which is expected to quadruple by calendar year 2024, are among the reasons for the analyst's optimism. Recent industry events, including TSMC's results, AMD (NASDAQ:AMD)'s AI event, and various meetings with industry experts and management, have reinforced the belief in NVIDIA's growth trajectory.
Additionally, NVIDIA's strategic enterprise partnerships with companies such as Accenture (NYSE:ACN), ServiceNow (NYSE:NOW), and Oracle (NYSE:ORCL), along with its software offerings, have been highlighted as underappreciated assets. The company's potential to generate $200 billion in free cash flow (FCF) over the next two years has also been noted.
The valuation of NVIDIA is considered compelling by the analyst, with its PE to year-over-year EPS growth-rate (PEG) ratio at 0.6 times for calendar year 2025 estimates, which is significantly lower than the average of 1.9 times for comparable leading tech companies, referred to as the "Magnificent Seven." Despite NVIDIA's broad ownership in the market, it is approximately only one times market-weighted in active portfolios, suggesting room for growth in investor holdings.
In other recent news, Taiwan Semiconductor Manufacturing Co (TSMC) has been making waves in the semiconductor industry. The company's positive sales forecast, particularly for artificial intelligence (AI) chips, has led to an increase in investor optimism and a boost in U.S. chip stocks. TSMC's projection indicates that AI chips are expected to constitute a mid-teen percentage of its total revenue this year. This positive outlook has also positively affected other industry players such as Nvidia (NASDAQ:NVDA), AMD, Broadcom (NASDAQ:AVGO), Qualcomm (NASDAQ:QCOM), and Micron (NASDAQ:MU).
On the other hand, ASML (AS:ASML), a leading equipment manufacturer for the semiconductor industry, reported a weaker-than-expected orders outlook, causing a decline in its shares and a ripple effect on other semiconductor stocks, including Nvidia. ASML's forecast reflects ongoing weakness in some segments of the chip market, particularly for non-AI applications.
TSMC's recent developments also include an anticipated 42% increase in third-quarter profit due to heightened demand for AI technology. The company is expected to report a net profit of T$300.1 billion ($9.33 billion) for the quarter ending September 30, a significant jump from the previous year.
In contrast, ASML's annual sales forecast was cut, citing weaker demand for non-AI chips. This led to a broad sell-off in the sector, with prominent chipmakers like Nvidia, AMD, Intel (NASDAQ:INTC), Arm, Broadcom, and Micron experiencing stock price declines. ASML's shares closed 16% lower after prematurely releasing its results, which showed a decrease in bookings and suggested a slower recovery in chip demand outside the AI sector.
InvestingPro Insights
NVIDIA's strong market position and growth potential, as highlighted by BofA Securities, are further supported by recent data from InvestingPro. The company's impressive financial performance is evident in its revenue growth of 194.69% over the last twelve months as of Q2 2025, with quarterly revenue growth of 122.4% in Q2 2025. This aligns with the analyst's positive outlook on NVIDIA's market dominance and expanding total addressable market.
InvestingPro Tips reveal that NVIDIA has a perfect Piotroski Score of 9, indicating strong financial health, and analysts anticipate continued sales growth in the current year. These factors reinforce the analyst's confidence in NVIDIA's future earnings potential. Additionally, NVIDIA's impressive gross profit margins, which stand at 75.98% for the last twelve months as of Q2 2025, underscore the company's operational efficiency and pricing power in the AI chip market.
It's worth noting that NVIDIA is trading at a high P/E ratio of 64.42, which may seem elevated at first glance. However, when considering the company's extraordinary growth rates, the PEG ratio of 0.15 suggests that the stock may still be undervalued relative to its growth prospects. This aligns with the BofA analyst's view that NVIDIA's valuation remains compelling despite its recent price appreciation.
For investors seeking more comprehensive analysis, InvestingPro offers 23 additional tips for NVIDIA, providing a deeper understanding of the company's financial health and market position.
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