Nvidia Remains a Top Choice Despite Challenges, Says Analyst

BofA Securities analyst Vivek Arya has reaffirmed a Buy rating on Nvidia Corp NVDA, establishing a price target of $190. This rating comes as Nvidia prepares for its fourth-quarter earnings call, set for February 26. Arya indicated that, despite facing challenges like the transition to the Blackwell product line and restrictions in China, he anticipates a modest earnings beat, steady sales guidance, and a decrease in gross margin for the upcoming quarter.

This earnings call is expected to represent a turning point in investor sentiment. Arya believes Nvidia will provide reassurances on its Blackwell execution, illustrate strong growth trends for fiscal 2026 and calendar 2025 with expectations of over 60% growth in data center sales. Furthermore, he anticipates that excitement will build ahead of the major GTC Conference happening on March 17, where the spotlight will turn towards a robust AI pipeline and developments in physical AI technologies.

Nvidia shares are currently trading at an attractive valuation of about 26 times the estimated price-to-earnings ratio for 2025, which is on the lower end of the 25-59 times range seen in the market’s median. Although DeepSeek, touted for its advanced optimizations, has emerged as a trend, key clients of Nvidia—such as Microsoft Corp and Meta Platforms Inc—have not modified their spending plans significantly.

Nvidia continues to lead the computing industry, catering to the growing needs for frontier-model training as it moves towards achieving artificial general intelligence (AGI). The shift towards advanced reasoning models and enhanced accuracy means that compute requirements are expected to increase drastically—up to fivefold compared to traditional models. While the dynamics among AI market drivers such as model training and AI inference may shift, Arya projects substantial overall market growth, estimating a total addressable market of around $500 billion by 2028 and 2029, increasing significantly from the 2024 and 2025 predictions.

Arya noted that since 2018, the performance of Nvidia processors has surged, achieving a 1000-fold increase in floating-point operations per second (FLOPS), which aligns with a remarkable 300 times growth in data center sales. He regards ongoing improvements in both hardware and software as critical to maintaining Nvidia's competitive edge.

The analyst also highlighted that with the Biden administration tightening AI diffusion regulations, Nvidia could see a rise in demand from Western markets—covering U.S. cloud services, enterprises, and OpenAI Stargate initiatives—helping to counterbalance any adverse effects from Chinese market dynamics.

Arya expresses a favorable outlook on both GPU manufacturers like Nvidia and ASIC vendors such as Broadcom Inc and Marvell Technology, Inc due to a growing need for AI-related computing power. However, he has yet to see indications that GPUs will lose their dominant market share, currently over 80%, to ASICs, which he believes will only account for a 10%-15% share of the overall accelerator market.

An increase in computational intensity for inference tasks suggests that Nvidia's specialized hardware and solid software integration create a high barrier of entry for emerging ASIC competitors.

For the fourth quarter, Arya forecasts Nvidia will generate approximately $38.7 billion in revenue, with adjusted earnings per share expected to be around $0.86.

Price Action: As of the latest update, Nvidia's stock has demonstrated a 2.45% increase, currently standing at $119.52.

Nvidia, Analyst, Earnings