Bank of America sees Nvidia as a major buying opportunity, with the stock trading at a 40-50% discount to AI compute peers and a 31-36% discount to the S&P 500. Analyst Vivek Arya has set a $350 price target, based on a 22x P/E (price-to-earnings ratio) on 2027 EPS (earnings per share), ahead of a closely watched earnings release later in August.
🔑 Key Takeaways
- Nvidia trades at a 40-50% discount to AI compute peers according to Bank of America.
- The $350 price target is based on a 22x P/E on estimated 2027 EPS.
- The stock’s trailing twelve-month P/E of 18.69 sits near an eleven-year low.
- Concerns around HBM memory costs and competition are considered overblown by analysts.
- BofA also recommends Natural Grocers, Dutch Bros, Lyntris and Thor Industries.
A discount deemed excessive versus AI peers
In a note published on August 18, 2026, BofA analyst Vivek Arya argued that Nvidia trades at roughly a 40-50% discount to comparable companies in the AI compute space, based on the EV/FCF (enterprise value to free cash flow) ratio. He described that gap as exaggerated relative to the actual risks tied to investments in names like OpenAI and Anthropic.
Against the S&P 500, the discount is estimated at 31-36%. The $350 price target corresponds to a P/E of 22 times estimated calendar-year 2027 EPS, excluding cash. That multiple sits within Nvidia’s historical range, which has spanned 15 to 56 times over the past several years.
Valuation multiple near an eleven-year low
Nvidia hit a 52-week high of $236.54 on May 14, 2026. Going into the late-August earnings release, despite an 8% rebound over the prior month, shares remained about 7% below that peak. More telling: the trailing twelve-month P/E stood at 18.69, nearly half of the ten-year average of 36.90, and close to an eleven-year low.
| Metric | Current Level | Historical Reference |
|---|---|---|
| 52-week high | $236.54 | May 14, 2026 |
| Discount vs AI peers (EV/FCF) | 40-50% | — |
| Discount vs S&P 500 | 31-36% | — |
| Trailing 12-month P/E | 18.69 | 10-year average: 36.90 |
| BofA price target | $350 | 22x 2027E EPS |
HBM memory costs and competition: manageable headwinds
Investors have grown nervous about rising memory component costs, particularly HBM (High Bandwidth Memory) chips, which could pressure margins. Arya dismisses that concern, pointing to Nvidia’s scale, pricing power and $119 billion in supply commitments.
The analyst also expects the upcoming Rubin platform to carry a meaningfully higher ASP (average selling price) than the current Blackwell lineup, which would offset higher memory costs and keep gross margins in the mid-70% range. On competition from Google’s TPUs designed with Broadcom, Arya notes these solutions have existed for more than a decade, a period during which Nvidia’s GPU revenues grew 700x. He maintains a long-term market share forecast of 65-70% of hyperscaler AI infrastructure spending.
“Concerns about memory costs and inference competition are likely more reflected in gross margins than in demand, and are partially embedded in the current multiple.”
Ruben Roy, Analyst at Stifel
Other BofA picks across consumer and defense
Beyond Nvidia, Bank of America flagged several other buying opportunities. The bank rates Natural Grocers by Vitamin Cottage a Buy with a $35 price target, is constructive on Dutch Bros on weakness, initiated coverage on defense connectivity specialist Lyntris with a Buy following its August 18 IPO (in which BofA served as lead bookrunner), and maintained a Buy on Thor Industries despite a difficult sector backdrop.
| Company | Sector | Rating / Target | Recent Performance |
|---|---|---|---|
| Natural Grocers | Organic grocery | Buy, $35 | +5% over 3 months, +19% YTD |
| Dutch Bros | Quick-service coffee | Buy (on weakness) | -43% over 3 months |
| Lyntris | Defense / Connectivity | Buy initiation | -8% over 1 month |
| Thor Industries | Recreational vehicles | Buy maintained | Difficult sector backdrop |
BofA’s Sara Senatore backed Dutch Bros by highlighting that coffee remains one of the fastest-growing segments in foodservice, with the share of consumers drinking espresso-based beverages in the past week climbing from 37% in 2020 to 43% in 2025. For Lyntris, Ronald Epstein pointed to favorable tailwinds across the company’s three end markets: space, maritime and air defense, supported by rising US and allied defense budgets. Analyst Vicky Liu sees Natural Grocers as offering premium quality without the premium price, citing margin expansion catalysts and unit growth potential, with the stock trading at just 13x 2027E EPS.
Cantor Fitzgerald names Nvidia its top semiconductor pick
In parallel, analysts at Cantor Fitzgerald named Nvidia their top pick in the semiconductor space, arguing that AI will continue to support chip stocks and represents a rare pocket of certainty amid shifting geopolitical and macroeconomic conditions. They expect AI infrastructure spending from hyperscalers, sovereign states, emerging cloud providers and enterprises to keep growing over the foreseeable future.
With upward revisions to capex (capital expenditure) by tech giants and solid product cycles across AI hardware vendors, these analysts expect the AI trade to remain the sector’s main growth driver. Stifel analyst Ruben Roy also expects Nvidia to beat estimates and raise guidance at the August print, citing rising capex from cloud providers, Foxconn’s cloud and networking segment crossing 50% of revenue for the first time, and Super Micro logging more than $60 billion in new orders in a single quarter.
Conclusion: an attractive entry point ahead of earnings
With a meaningful discount to AI peers and the S&P 500, a P/E near an eleven-year low, and a private investment portfolio whose value keeps climbing (Anthropic leading the way), Nvidia checks several boxes of a quality-at-a-reasonable-price setup. The identified risks, including HBM memory, TPU competition and gaming cyclicality, are largely priced into the current multiple, with the stock trading below Microsoft and Apple despite similar AI opportunities and comparable memory cost pressures.
The next catalyst will be the company’s earnings release, expected at the end of August. If Nvidia confirms its ability to top expectations and raise guidance, as it has in previous quarters, the stock could quickly close part of its discount. Conversely, any signal of weakness in gross margins or cloud capex could reignite selling pressure. The base case remains constructive, underpinned by the long-term trajectory of AI infrastructure spending.
Sources
- CNBC – Nvidia and these other stocks are on sale, Bank of America says
- Bloomberg – BofA Sees Nvidia Trading at Up to 50% Discount on AI Risks
- Yahoo Finance – Nvidia stock’s deep discount creates a compelling opportunity
- Morningstar / MarketWatch – Nvidia’s stock trades at a juicy discount
- MarketWatch – Why Nvidia and chip stocks were deemed hot plays
This article is for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decisions.
