Bank of America upgrades Nvidia to top sector pick on Vera Rubin cycle
BofA cites $350 price target and 16x forward earnings valuation as key drivers ahead of August 26 earnings release
Bank of America analyst Vivek Arya has designated Nvidia as his top sector pick ahead of the company’s fiscal Q2 FY2027 earnings report scheduled for 26 August. In a research note distributed on 7 August, Arya forecasts second-quarter revenue of $94 billion to $95 billion, a figure that surpasses Nvidia’s own guidance of $91 billion. The analyst projects third-quarter revenue to reach $107 billion to $108 billion, significantly above the approximately $104 billion currently modelled by Wall Street.
The optimism stems from the commencement of deliveries for the Vera Rubin next-generation chip, which Arya describes as the beginning of an extended upgrade cycle spanning multiple quarters. Nvidia confirmed in June that Vera Rubin has entered full production, with cloud partners including AWS, Google Cloud, Microsoft, and Oracle preparing deployments. Early customers such as OpenAI, Anthropic, and SpaceX are also positioned to utilise the platform, which pairs Rubin GPUs with the new Vera CPU.
Arya maintains a $350 price target for Nvidia, implying roughly 56% upside from the share price at the time of the note. He highlights that the stock is trading at approximately 16 times forward earnings, its lowest valuation in a decade, despite a rising earnings trajectory. The bank’s earnings per share projections suggest Nvidia could exceed $13 per share by 2027 and more than $25 by 2030, assuming the AI data centre market develops along the outlined model.
Addressing concerns over memory cost inflation, Arya argues that strong GPU rental prices and Nvidia’s pricing power will sustain gross margins between 73% and 74%. While memory costs have risen to represent 40% to 50% of production costs, the impact on Vera Rubin compute racks is estimated at only 60 basis points of gross margin pressure compared to Blackwell Ultra. The analyst notes that Nvidia’s long-term supply agreements and high rental rates provide room to pass through costs rather than absorb them.
The note also addresses Nvidia’s $70 billion commitment in direct equity stakes to ecosystem partners, including $30 billion to OpenAI. Arya contends that these investments represent approximately 15% of the $470 billion in free cash flow expected across 2026 and 2027, leaving ample scope for the company to continue returning capital to shareholders while maintaining its market dominance.
