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It’s no secret that computer gaming chipmaker turned AI prodigy Nvidia (NVDA) has had a great year, but for investors, the party may just have begun.
“The opportunity for revenue monetization is much greater than investors realize,” Bank of America analyst Vivek Arya told Yahoo Finance executive on the Opening Bid podcast. – Speaking to editor Brian Sozzi (watch video above, watch below).
“Right now, they’re very much a system integrator. They sell complete racks with all the compute, networking, optical resources, memory and everything else built in,” Arya added.
The top semiconductor analyst just caused a stir in the market with his latest remarks against Nvidia.
He raised his EPS forecast for 2024 and 2025, citing the potential for strong demand for new Blackwell chips. Aria said demand for Nvidia’s previous AI chip, Hopper, remains high. 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.
Rival AMD (AMD) stock has 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 suffer through one of the worst periods in its history, dominated by layoffs and inferior products. The stock has plummeted 55% this year.
Key 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.
When it comes to developing the country’s AI infrastructure, Alia said, “Everyone is competing,” and said a scenario where companies like OpenAI and META lead the market with open structures, and cloud companies act as intermediaries. I’m imagining. 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. This is not a temporary thing. This is a really big problem,” Siebel said.
Three times a week, Yahoo Finance Executive Editor Brian Sozzi has insightful conversations and chats with some of the biggest names in business and markets on Opening Bid. Find more episodes on our video hub or watch on your favorite streaming service.
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