Key Takeaways
- Bank of America maintains its Buy recommendation on NVDA stock with a $350 price objective, suggesting 78% potential gains
- NVDA shares have climbed only 4% this year compared to the SOX semiconductor index’s nearly 72% rally
- BofA analyst Vivek Arya argues that worries about margin compression and ASIC threats are exaggerated
- Since custom ASICs debuted in 2015, Nvidia’s GPU revenue has expanded 700-fold
- The next earnings report could serve as a turning point for investor sentiment, according to Arya
While the semiconductor sector has enjoyed explosive gains in 2026, Nvidia has been notably absent from the party. The chip giant’s shares are up a modest 4% year-to-date, dramatically trailing the SOX semiconductor index’s impressive 72% climb.
According to Vivek Arya, a Bank of America analyst ranked among the top 2% of Wall Street professionals, this divergence presents an attractive entry point. He maintains a $350 price objective on NVDA shares, which currently hover around $197 — implying potential returns of approximately 78%.
Arya identifies four primary headwinds affecting investor sentiment: potential gross margin erosion from elevated memory expenses, emerging ASIC competition, concentrated institutional holdings, and capital deployment questions related to vendor financing arrangements.
His assessment? These concerns don’t hold up under scrutiny.
Regarding memory expenses, Arya acknowledges that HBM costs per rack may increase by $0.2–0.3 million during the transition from Blackwell to Rubin platforms. However, he projects that rack pricing could jump $2–3 million — escalating from the current $3–4 million range to $6–7 million. This pricing leverage should sustain gross margins around the mid-70% level, he contends.
Custom Chips Have Coexisted With Nvidia for Years
The ASIC competitive narrative has substance, but it’s hardly a new development. Google introduced its TPU processor back in 2015. Amazon entered with Trainium in 2020. Meta brought MTIA to market in 2023. Despite this competition, Nvidia’s GPU accelerator revenue multiplied 700 times over this period.
Recent segment disclosures reveal that Nvidia’s hyperscaler revenue jumped 115% year-over-year — outpacing cloud capital expenditure growth by a factor of two. This suggests Nvidia is actually expanding its market position, Arya maintains.
The fundamental distinction between GPUs and ASICs centers on versatility, he explains. ASICs are engineered for narrow use cases within individual hyperscaler infrastructures. Nvidia delivers a universal platform with broad compatibility. Arya projects Nvidia will capture 65–70% of AI infrastructure spending over the long term, with ASICs and competitors like AMD splitting the remaining 30–35%.
Concerning ownership dynamics, approximately 78% of active S&P 500 funds maintain NVDA positions, with 1.15x average weighting. Strategic investment commitments total roughly $65 billion. While Arya recognizes these as potential headwinds, he calculates that such investments represent under 35% of free cash flow, preserving capacity for share repurchases and dividend distributions.
Next Earnings Report Could Shift Momentum
Arya believes the approaching earnings announcement represents a critical inflection point for the stock. He anticipates it will “reinforce Nvidia’s competitive advantages across products, pricing strategy, and supply chain execution.”
At present valuations, NVDA trades at 18x forward earnings — its lowest multiple in seven years. Comparable large-cap technology companies — Amazon, Meta, Google, Microsoft, and Apple — command average forward multiples between 19x–22x based on CY27/28 projections. That represents a 30–35% valuation premium over Nvidia, which Arya considers unwarranted given the company’s growth trajectory.
Wall Street consensus strongly supports this view. Among 37 analyst ratings, 36 recommend buying while just one rates it a Hold. The consensus price target stands at $309.33, indicating 57% potential appreciation over the next twelve months.
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