BofA reiterates bullish on Nvidia: market overconcerned about HBM cost and ASIC competition, current valuation near 11-year low

Mars Finance News, July 9 – Bank of America's latest research report stated that market concerns over Nvidia's rising high-bandwidth memory (HBM) costs and competition from ASIC custom chips have been overstated, underestimating the company's strong pricing power, supply chain advantages, and ecosystem moat. BofA believes that the upcoming Rubin AI platform is expected to cover HBM cost increases through higher selling prices, while Nvidia's supply chain commitments of approximately $119 billion will further solidify its cost advantage, with the bank projecting gross margins to remain at around the mid-70% level.

Regarding the market's focus on ASIC substitution risk, BofA pointed out that Google's TPU has been developed for over a decade, yet during the same period, Nvidia's GPU business revenue has grown about 700 times, showing that custom chips have not eroded GPU's dominant position in AI training and inference. The bank expects Nvidia to continue capturing 65% to 70% of global hyperscale cloud AI infrastructure spending.

On valuation, BofA noted that Nvidia's current forward P/E ratio is about 18.7 times, roughly half of its 10-year average of about 37 times, and near an 11-year low, suggesting pessimistic expectations have been fully priced in. With the Rubin platform advancing and the August earnings report approaching, BofA expects Nvidia to once again validate its product competitiveness and profitability, potentially driving the market to reassess a valuation premium.