BofA: Nvidia's mere 3% gain this year is a valuation mispricing! P/E ratio has sunk to a 7-year low.

Bank of America (BofA) analyst Vivek Arya noted in a latest report that NVIDIA's valuation has fallen to its lowest since the start of the current AI bull market, with its forward P/E ratio at only about 18 times, a near 7-year low. This represents a discount of approximately 30% to 35% compared to the five tech giants — Apple, Microsoft, Google, Amazon, and Meta. He believes the market is essentially betting on a sharp downward revision of NVIDIA's EPS, an assumption he calls "untenable." He reiterated a Buy rating and a price target of $350, implying about 78% upside from the current stock price.

(Previous report: China reportedly allows Alibaba, ByteDance, and DeepSeek to purchase NVIDIA H200 chips, Trump's loosening finally approved after six months)

(Background: AI devours memory, $100 low-cost phones may disappear from the market)

Table of Contents

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• Market only willing to give NVIDIA 0.3 times
• Memory overestimated, pricing power underestimated
• ASIC threat countered with 700x growth

Key Highlights

• BofA notes NVIDIA's forward P/E is only about 18 times, a near 7-year low, at a 30% to 35% discount to the five big tech giants
• NVIDIA's 2027 PEG is only 0.3 times, far below Apple's 2.7, Microsoft's 1.0, and Google's 1.9
• BofA reiterates Buy, price target $350, implying about 78% upside from current price of ~$197

As the core company in the AI wave, NVIDIA's stock price has been unusually quiet this year. Bank of America analyst Vivek Arya highlights a stark contrast in his latest report: NVIDIA has only risen 3% year-to-date, far behind the Philadelphia Semiconductor Index's 82% gain. In his view, this huge divergence signals not a warning but an "enhanced buying opportunity."

Arya's reasoning is valuation. NVIDIA's current forward P/E is only about 18 times, a low point in nearly 7 years, compared to estimated P/E ratios of about 21.5 times for fiscal 2027 and dropping to 14.7 times for fiscal 2028. This figure is not only lower than NVIDIA's own historical range but also represents a 30% to 35% discount to the average estimated P/E of 22 times (2027) and 19 times (2028) for the five big tech giants — Apple, Microsoft, Google, Amazon, and Meta. In other words, the market's current pricing of NVIDIA essentially assumes a 30% to 35% cut in its EPS for 2027 and 2028, an assumption Arya calls "untenable."

Market only willing to give NVIDIA 0.3 times

The gap is even more pronounced when factoring in growth. From a PEG (price/earnings to growth) perspective, NVIDIA's 2027 PEG is only 0.3 times, far below Apple's 2.7, Microsoft's 1.0, and Google's 1.9. Among the same tech giants, the market is willing to pay 2.7 times for every unit of Apple's growth, but only 0.3 times for faster-growing NVIDIA.

Memory overestimated, pricing power underestimated

Arya also addresses the market's two major concerns one by one. The first is the impact of memory costs. He believes the market overestimates cost pressure while underestimating NVIDIA's pricing power. From the upgrade to Blackwell and Vera Rubin, the incremental HBM cost per rack is about $200k to $300k, but the selling price of the entire rack is expected to rise by $2 million to $3 million, reaching $6 million to $7 million.

The price increase is driven not only by memory but also by a full set of components that do not require HBM, such as Vera CPU, NVLink, and Quantum Ethernet, as well as a range of software features that reduce inference costs. Additionally, with NVIDIA having built a moat through over $119 billion in supply chain prepurchase commitments, Arya estimates its gross margin can still be maintained in the mid-70% range.

ASIC threat countered with 700x growth

The second concern is competition from customized ASIC chips. In response, Arya directly cites data: since Google launched its TPU in 2015, sales of NVIDIA GPU accelerators have grown approximately 700 times; sales to hyperscale cloud providers are up 115% year-over-year, about twice the growth rate of cloud capital expenditures. This indicates that NVIDIA's share of these major customers' spending is not being eroded by ASICs but is actually expanding.

BofA expects NVIDIA to maintain a market share of 65% to 70% or more of AI computing capital expenditure in the long term. Arya believes the upcoming earnings call could serve as a key catalyst for NVIDIA to clearly communicate its pricing power and moat to the market. It is also worth noting for the crypto market: NVIDIA is almost the pricing anchor for the entire AI computing narrative, and its capex outlook and stock sentiment often influence the overall market direction for AI and risk assets.

FAQ

Why does BofA think NVIDIA is undervalued now?

BofA analyst Vivek Arya points out that NVIDIA's forward P/E is only about 18 times, a near 7-year low, at a 30% to 35% discount to the five big tech giants, and its 2027 PEG is only 0.3 times. He believes the market is essentially assuming a sharp EPS cut for NVIDIA, an assumption he finds untenable.

What is BofA's price target for NVIDIA?

BofA reiterates a Buy rating with a price target of $350. Based on the current stock price of around $197, this implies approximately 78% upside. BofA also sees NVIDIA maintaining a market share of 65% to 70% or more of AI computing capital expenditure over the long term.