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It’s no secret that Nvidia (NVDA), the computer gaming chip maker turned artificial intelligence genius, has had a great year, but for investors, the party may just have begun.
“The revenue monetization opportunity is much larger than investors are giving it credit for,” Bank of America analyst Vivek Arya said on Yahoo Finance’s Opening Bid Podcast. – Speaking to Yahoo Finance Editor-in-Chief Brian Sozzi on Finance’s Opening Bid Podcast (video above, listen below).
“Right now, they’re really system integrators,” Arya added. “They sell complete racks that have compute, networking, optical resources, memory and everything else built in.”
The top semiconductor analyst just caused a stir in the market with his latest remarks against Nvidia.
He raised his earnings per share forecast for 2024 and 2025, citing likely strong demand for new Blackwell chips. Aria said demand for Nvidia’s previous AI chip, Hopper, remains hot. With this in mind, Arya says NVIDIA’s stock is still trading at a discount at 37 times forward earnings.
The company is poised to generate $200 billion in free cash flow over the next two years, making the stock look cheap on a price-to-cash flow basis, Aria said.
Aria believes Nvidia stock has at least 40% upside potential. The stock is already up 190% year-to-date and remains near record levels, with an 18% gain in October.
Shares of rival AMD (AMD) have only risen 5% since the beginning of the year after performance specs for the company’s AI chips released a few weeks ago disappointed investors.
Meanwhile, Intel (INTC) continues to struggle through one of its worst periods in its history, dominated by layoffs and inferior products. The stock has plummeted 55% this year.
The main drivers of Arya’s bullish case for Nvidia (along with his less bullish view on Intel) include upcoming next-generation AI chips, Blackwell Ultra, Rubin, and Rubin Ultra. Based on Arya’s analysis, these products are expected to begin entering the market in Q3 2025.
“Everyone is in competition,” Arya said of the country’s AI infrastructure. Arya envisions a scenario where companies like OpenAI and META drive the market with an open structure, and cloud companies act as intermediaries. This only furthers the need for Nvidia’s best-in-class chips.
Tom Siebel, CEO of C3.ai (AI), said at the time of the bid opening that this is a real and persistent demand backdrop.
“This has a lot to do with AI, so this is a long-term change,” Siebel said. “This is not a temporary thing. This is a really big deal.”
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