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Bank of America says NVIDIA stock doesn’t look expensive, even at a $2 trillion valuation.
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Ahead of the “AI Woodstock” event, the bank raised its price target on NVIDIA to $1,100, implying a 24% upside.
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BofA said Nvidia is trading at a lower forward P/E than in November 2022.
Even at a $2.2 trillion valuation, Nvidia stock is still not overvalued, Bank of America said in a note Wednesday.
The bank reiterated its Buy rating and raised its price target to $1,100 from $925, implying a potential upside of 24% from current levels.
“Despite the year-to-date outperformance, NVDA’s valuation and ownership remain attractive relative to its semiconductor/infotech peers,” said Bank of America analyst Vivek Arya. said.
Nvidia stock has soared 80% since the beginning of the year, and is up 287% over the past year as demand for AI-enabled graphics cards continues unabated.
But despite the incredible success of Nvidia’s underlying business, the company’s stock still trades at a lower valuation than it did in 2022, when ChatGPT first launched.
“NVDA’s stock price has fallen from 44 times P/E when ChatGPT was launched in November 2022 to NTM PE of 37 times,” Arya said. He added that the company’s expected price/earnings ratio (PER) is trending steadily within the range of 26 times to 69 times.
Meanwhile, while most investors own Nvidia stock, they remain underweight the stock relative to its weight in the S&P 500.
“Valuations and ownership levels still suggest upside potential,” Arya said. “Our recent ownership analysis shows that while NVDA is widely owned (67% of funds in our study), its relative weight (NVDA ownership concentration vs. SPX concentration) is lower than that of large-cap stocks. It is below its Infotech peer (1.01x vs. 1.13x). It has nearly 9x growth potential,” Arya said.
Further gains in Nvidia stock could be triggered by its “AI Woodstock” event on March 18th, when the company will host a GPU Tech Conference and announce the successor to its wildly popular H100 chip.
“We expect GTC to introduce: 1) growing influence of genAI, omniverse/digital twins across a wide range of end markets, and 2) nearly 1-20 using accelerators. Opportunity to rebuild $250 million global computing infrastructure, resulting in $500 billion annual market over the next 3-5 years (previously $250 billion); 3) Accelerators (B100, N100), Ethernet switches; Pipeline updates across DPU, Edge AI,” Arya said.
Read the original article on Business Insider
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