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Nvidia shares have fallen since the company reported earnings last week.
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According to Bank of America, the decline offers attractive buying opportunities.
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According to the bank, the chip manufacturer’s share price is at its lowest level in the past five years.
Bullish opinion on Nvidia may have been paralyzed by the sudden headwinds the company is facing, but for Bank of America, the stock’s decline over the past week presents an attractive buying opportunity.
Shares of the semiconductor powerhouse tumbled on Tuesday, slashing its market value by $279 billion, the biggest one-day drop in U.S. corporate history.
The pullback came after the company’s recent earnings report fell short of the market’s most optimistic expectations, fueling fears that the rally in artificial intelligence could lose steam.
The stock briefly extended its slide on Wednesday following a report that the company had received a subpoena from the Justice Department. In total, the stock has fallen as much as 15% since Nvidia reported its second-quarter earnings in late August.
For Bank of America, the post-earnings decline is a buying opportunity.
In a note published Thursday, the bank said Nvidia is now hovering around its lowest valuation in five years.
“While market forces may increase stock volatility in the near term, we still find NVDA’s valuation attractive at 27x consensus P/E for CY25/FY26E (or just ~20x P/E at a $5+ cap on CY25 EPS),” wrote analyst Vivek Arya.
For comparison, Nvidia’s price-earnings ratio has fluctuated between the mid-20s and mid-60s over the past five years.
Investors who buy the stock now can expect upside potential of 54%, according to BofA’s price target of $165 per share.
This seems achievable, as Nvidia will remain a major beneficiary of AI investments and will not always be pressured by headwinds, the bank said. For example, weak supply-side fundamentals should abate in the near term, the analysts noted.
While investors are disappointed with delays in the company’s next-generation Blackwell chip development, BofA expects deliveries to be confirmed in the coming weeks.
In any case, the bank does not expect demand for previous-generation Hopper chips to disappear, given the high demand for AI.
As for the regulatory concerns, Nvidia has since denied receiving a subpoena from the Department of Justice.
Bloomberg, which first reported the subpoena, later reported that the Justice Department had sent a civil investigative request, citing a source close to the matter.
While BofA expects these developments to have no consequences, it notes that it is not uncommon for the government to file lawsuits against major U.S. technology companies.
Finally, skepticism about AI’s potential remains a non-issue, the bank said, at least until 2026. Those concerned that the wave of AI spending isn’t yet delivering results should simply be patient, the analysts wrote.
“The tech industry will give itself at least another 1-2 years of intensive buildout of the NVDA Blackwell chip with its 4x lift in AI training and 25x+ lift in inference. The efforts so far with the first wave of large language models (LLM), using NVDA Hopper, were just a taste,” BofA wrote, anticipating that real AI possibilities will be unlocked by upcoming LLMs.
Read the original article on Business Insider
