Nvidia Corporation (NASDAQ:NVDA)'s generative artificial intelligence (genAI) dominance can potentially help generate about $100 billion of incremental free cash flow (FCF) over the next two years, according to Bank of America analysts.
In an update to clients, the analysts noted NVIDIA’s FCF provides ammunition for new organic and inorganic growth initiatives to potentially acquire software assets to build up the company’s recurring revenue profile.
"While NVIDIA has a solid lead in AI, hardware-oriented businesses are not valued as highly as visibility tends to be limited," the analysts wrote.
They added that given NVDA already has strong computer and networking assets, storage could be an area of further investments to round out its profile of becoming an end-end optimized AI systems vendor.
Analysts at Bank of America also see the upcoming CES and GTC tradeshows as being potential news flow/stock price catalysts that could help its shares break out of its $400-$500 trading range over the last few months.
They maintained their ‘Buy' rating on NVIDIA stock, calling it a top sector pick.
Shares of NVIDIA climbed 5% to $515.20 in midday trading on Monday.