Analysts at Bank of America have raised their price target on chipmaker Nvidia (NASDAQ:NVDA, ETR:NVD), maintaining it as their top pick in the AI sector.
They upped their price target to $190 from $165 and repeated their ‘Buy’ rating. Nvidia traded hands at $138 on Friday.
Analysts see recent events, including AMD's AI conference, meetings with companies like Broadcom and Micron and expanding enterprise relationships, strengthening Nvidia's leadership position.
They highlighted Nvidia's dominant market share of 80% to 85% and a total addressable market exceeding $400 billion.
Positive indicators include TSMC’s results, strong demand for large language models, and significant enterprise partnerships with firms such as Accenture and Oracle.
Analysts also see the company’s free cash flow generation as “underappreciated.”
“We note NVDA's underappreciated free cash flow generation at 45% to 50% plus margin, nearly double that of the Magnificent 7 average of 23% to 25%,” they wrote.
“In dollar terms, Nvidia could take in $200 billion-plus of free cash flow over the next two years, rivaling that of Apple and providing growth optionality.”
They also noted that if Nvidia can achieve a 15% to 20% networking mix, along with improved yields from its Blackwell architecture, FY26 earnings per share (EPS) could exceed $5, surpassing consensus estimates of $4.06.
“In our view, Nivida's valuation remains compelling at just 0.6x CY25E price to earnings ratio (PE) to year-over-year EPS growth rate or price/earnings to growth (PEG), well below the Magnificent 7 average of 1.9x,” they wrote.