Bank of America revamps Nvidia stock forecast on AI skepticism
Investors eagerly await Nvidia’s third-quarter earnings launched The company’s results will to some extent reflect the state of the AI industry as a whole, as Nvidia is at its core. As artificial intelligence skepticism increases, this puts great pressure on the company.
Nvidia CEO Jensen Huang doesn’t think AI is a bubble like the dot-com bubble. Many experts believe it’s a bubble, but some, like Jeff Bezos, think it’s more like the biotech bubble of the ’90s.
The company’s success in AI is easily measured by its secure orders, and Huang noted that the company has already received half a trillion dollars in orders for AI chips over the next five quarters. Financial Times.
While there is no doubt that Nvidia is profitable and the hardware it produces serves its purpose, the software side of artificial intelligence (the bubble) is quite different. If this side is not profitable, then we are definitely not in a “good bubble”.
To determine whether this is the case, we need to consider OpenAI as the largest AI player in the software space. It’s not currently profitable, and the company has committed to spending $1.4 trillion building computing resources over the next eight years. Reuters.
OpenAI is a private company that does not publish earnings reports; but it’s lucky Microsoft invested in it (because it has to report to the SEC). A securities filing from Microsoft suggests that OpenAI lost more than $12 billion in the third quarter.
OpenAI CFO Sarah Friar recently suggested that government involvement would help the company take on more debt. But David Sacks, the White House’s AI and crypto czar, said there will be no federal bailout for AI.
Bank of America analyst Vivek Arya and his team addressed this AI skepticism in their latest research notes.
Huang said the company has already received half a trillion dollars in orders for AI chips over the next five quarters.Image source&column; Chih/Bloomberg via Getty Images” loading=”eager” height=”540″ width=”960″ class=”yf-1gfnohs loader”/>
Huang said the company has already received half a trillion dollars in orders for AI chips over the next five quarters.Image source: Chih/Bloomberg via Getty Images
Analysts said widespread skepticism about AI capital spending is understandable, but it likely has the opposite positivity and helps minimize overcrowding.
“The common argument that ‘AI stocks must be overvalued because OpenAI cannot justify $1.4 trillion in long-term commitments’ is a lazily chosen argument in our view,” they wrote.
The team noted that OpenAI’s spending has not yet been implemented and will be constrained by practical constraints such as access to power and data center space. Publicly traded hyperscalers that are upgrading their infrastructure are making the most of their AI spending and are profitable.
They said Nvidia’s announcement of $500 billion in 2025-26 data center orders shows that the stock has the capacity to grow sales/EPS by 50% and 70% on an annualized basis at multiples of 24 in an undemanding price-to-earnings market.
Analysts added that they thought the “daily noise” around China’s restrictions was irrelevant to near- and medium-term fiscal forecasts.
In a research note shared with TheStreet, Arya reiterated a buy rating and $275 target price based on Nvidia’s 44 times cash-exclusive price-to-earnings ratio estimate for calendar year 2026, which is within the historical forward-year price-to-earnings range of 25 to 56.
He concluded by saying that pluralism is “justified by”. [Nvidia]”‘s leading share of the fast-growing AI compute/networking markets is offset by the imbalance in global AI projects, the cyclical gaming market, and concerns about access to power.”
Weakness in the consumer-focused gaming market
Competition with large public companies
Bigger-than-expected impact of restrictions on IT shipments to China
Erratic and unpredictable sales in new enterprise, data center and auto markets
Potential to slow capital returns
Enhanced government review of Nvidia’s dominant market position in AI chips
Nvidia (NVDA) and Deutsche Telekom are building a €1 billion ($1.2 billion) data center in Germany that is scheduled to be operational in early 2026. Bloomberg report.
The companies describe the project as the Industrial AI Cloud, a sovereign, enterprise-level platform. New platform It combines Deutsche Telekom’s infrastructure and operations with Nvidia AI and Omniverse digital twin platforms.
More Nvidia:
Nvidia shared At the APEC summit, he announced that South Korea would expand its AI infrastructure with more than a quarter million Nvidia GPUs across its sovereign clouds and AI factories. South Korea’s Ministry of Science and ICT (MSIT) plans to distribute up to 50,000 of the latest Nvidia GPUs.
Initial deployment, NHN Cloud and Kakao Corp. It will consist of 13,000 Nvidia Blackwell GPUs and other GPUs by Nvidia Cloud Partner NAVER Cloud in collaboration with Nvidia Cloud Partner NAVER Cloud.
The company also announced plans To build a new AI factory with Samsung Electronics. The AI factory will combine Samsung’s semiconductor technologies with Nvidia’s platforms to lay the foundation for AI-driven manufacturing.
More than 50,000 Nvidia GPUs will power Samsung’s semiconductor AI factory. Accelerated computing is intended to be directly integrated into advanced chip manufacturing.
Related: Bank of America revamps AMD stock forecast ahead of major event
