The increase is far lower than the chip index! Bank of America Merrill Lynch says NVIDIA Corporation (NVDA.US) "valuation is unreasonable"

The market is mispricing, NVIDIA Corporation (NVDA.US) unreasonable "discount" is a golden buying point! Despite dominating the field of artificial intelligence, NVIDIA Corporation's stock price has only risen by 3% so far this year, far behind the 82% surge of the Philadelphia Semiconductor Index. Bank of America believes that this huge deviation reveals an attractive buying opportunity. According to a report from Bank of America Securities on July 7th, the core logic is clear: the current undervaluation of NVIDIA Corporation is due to the market's excessive pricing of memory costs, ASIC competition, and concentration of holdings, rather than a true deterioration of fundamentals. The bank believes that the market's current valuation of NVIDIA Corporation implies an "unreasonable discount" of up to 30-35% of earnings per share (EPS) for 2027/2028, resulting in a forward price-earnings ratio at its lowest point in 7 years (18x). In other words, the market is paying for a nonexistent risk. At the same time, Bank of America believes that the market is overly concerned about rising memory costs, ASIC competition, crowded institutional holdings, and efficiency of fund utilization, while completely ignoring NVIDIA Corporation's unrivaled pricing power, $119 billion in supply chain commitments, and expanding market share. With the AI data center spending supercycle not yet peaking, and NVIDIA Corporation's moat continuing to deepen, Bank of America believes that the current stock price provides an "enhanced buying opportunity," reiterating a "buy" rating for NVIDIA Corporation with a target price of $350, implying over 70% upside from the current price of $204.12. Valuation paradox: Lowest price-earnings ratio in 7 years, why is the market discounting? NVIDIA Corporation's current stock price is $195.55, corresponding to a forward price-earnings ratio of only about 21.5 times for the fiscal year 2027 (Bank of America's estimated EPS is $9.09), dropping to 14.7 times for 2028. This valuation level is not only the historical low for NVIDIA Corporation in nearly 7 years but also significantly diverges from its large tech peers. Bank of America's comparison data shows that Apple Inc., Microsoft Corporation, Alphabet Inc. Class C, Amazon.com, Inc., and Meta, the five tech giants, are currently trading at an average of 22x/19x forward price-earnings ratios for 2027/2028, approximately 30-35% higher than NVIDIA Corporation. The core argument from Bank of America is that NVIDIA Corporation's AI opportunities and memory cost pressures are not fundamentally different from those of the aforementioned companies, yet it suffers from an additional discount. This discount implies that the market has already "priced in" a 30-35% downward impact on NVIDIA Corporation's EPS for 2027/2028 - a hypothesis that Bank of America believes is fundamentally flawed. From a price-earnings-to-growth ratio perspective, NVIDIA Corporation's 2027 PEG is only 0.3x, much lower than Apple Inc.'s 2.7x, Microsoft Corporation's 1.0x, and Alphabet Inc. Class C's 1.9x, showcasing exceptional value for investors. Additionally, Bank of America believes that this significant valuation discount is entirely due to the market's overreaction to memory costs and competitive rhetoric. The upcoming earnings conference calls are expected to be a crucial positive catalyst, further clarifying NVIDIA Corporation's indomitable moat in products, pricing, and supply chain. Memory costs: Impact overstated, pricing power underestimated The market's concern about NVIDIA Corporation's gross margin primarily focuses on the continuous rise in [...]