Bank of America Argues Nvidia Stock Is Undervalued Ahead of August Earnings

Bank of America Rebuts Nvidia Skepticism, Flags Valuation Opportunity

Bank of America has rebutted market skepticism toward Nvidia Corp., framing the semiconductor giant’s underperformance as a valuation anomaly rather than a fundamental deterioration. Analyst Vivek Arya argues the stock’s next-12-month price-to-earnings (P/E) ratio, near an 11-year low of 18.69, presents a compelling entry point ahead of its August earnings report.

The call comes amid concerns over rising high-bandwidth memory (HBM) costs and competition from hyperscalers developing custom chips. Arya counters that Nvidia’s pricing power and $119 billion in supply-chain commitments will offset component inflation. He projects gross margins to stabilize in the mid-70% range through the Rubin platform transition, undermining bearish narratives on margin compression.

Regarding custom chip threats, such as Google’s TPUs, Arya notes that Nvidia’s GPU revenue has grown 700-fold over the past decade despite TPUs’ existence. He expects Nvidia to retain 65-70% of hyperscaler AI infrastructure spending long-term, citing its entrenched product and supply-chain advantages.

Valuation metrics further support the bullish stance. Nvidia trades at roughly half its 10-year average forward P/E of 36.90, lagging peers like Microsoft and Apple despite comparable AI exposure. Arya anticipates the August earnings print to reaffirm Nvidia’s competitive moats, potentially catalyzing a re-rating.

Implications for Traders and Risk Sentiment

For Forex traders, Nvidia’s trajectory could influence risk appetite in global markets. A positive earnings outcome may buoy equities and risk-sensitive currencies like the Australian dollar (AUD) or New Zealand dollar (NZD), while a miss could strengthen safe-haven assets such as the U.S. dollar (USD) or Swiss franc (CHF). The semiconductor sector’s performance often correlates with broader tech sentiment, impacting indices like the Nasdaq and, by extension, currency pairs tied to growth expectations.

Technical indicators suggest Nvidia’s stock remains range-bound ahead of the earnings catalyst. Traders may monitor key support levels around $120 and resistance near $150, with volatility likely to spike post-report. The outcome could also sway Fed policy expectations, as strong tech earnings might delay rate-cut timelines amid persistent inflationary pressures.

Risk Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Traders should conduct independent research and consider market risks before making decisions.