Bank of America reiterates bullish stance on Nvidia: Market overly concerned about HBM costs and ASIC competition, current valuation near 11-year low

BlockBeats News: On July 9, a recent research report from Bank of America said that market worries about Nvidia’s high-bandwidth memory (HBM) costs rising and competition from ASIC custom chips have been amplified, underestimating the company’s strong pricing power, supply-chain advantages, and ecosystem barriers. BofA believes that the soon-to-be launched Rubin AI platform is expected to cover the increase in HBM costs through higher selling prices, and Nvidia’s approximately $119 billion in supply-chain commitments will further reinforce its cost advantage, with the company’s gross margin still expected to remain in the mid-70% range.

Regarding the ASIC substitution risk that the market is concerned about, BofA noted that although Google TPU has been developed for more than a decade, Nvidia’s GPU business revenue has grown by about 700 times over the same period, showing that custom chips have not weakened GPUs’ dominant position in AI training and inference. The bank expects Nvidia to continue accounting for 65% to 70% of global hyperscale cloud providers’ AI infrastructure spending going forward.

On valuation, BofA believes Nvidia’s current forward P/E is about 18.7x, only half of the past decade’s average level of about 37x, close to the low point from roughly 11 years ago, with pessimistic expectations having already been fully priced in. As the Rubin platform moves forward and the August earnings report approaches, BofA expects Nvidia to once again validate its product competitiveness and profitability, and drive the market to reassign a valuation premium.