BofA Securities is doubling down on NVIDIA Corp. (NASDAQ:NVDA), reiterating its Buy rating and $300 price objective — implying roughly 43% upside from Monday’s $210 level.
The analysts argued that the next leg higher won’t be driven by another AI product cycle, but by something far more old-school: cash returns to shareholders.
- NVDA stock is moving. See the chart and price action here.
In a Monday note titled “Back to Basics,” analyst Vivek Arya and team called Nvidia their top semiconductor pick and laid out why the chip giant’s valuation looks dramatically out of step with its earnings power.
A 50% Discount To Big Tech
Despite a $5.18 trillion market cap, Nvidia trades at under 20x CY27 earnings and enterprise value/free cash flow — roughly a 50% discount to Magnificent 7 peers averaging 41.5x, and a 66% discount on EV/FCF, according to the firm.
On a Price/Earnings-to-Growth basis, Nvidia sits at just 0.36x versus a peer average of 2.61x.
The kicker: BofA estimates Nvidia will generate more than $400 billion in free cash flow across CY26-CY27, roughly equivalent to Apple Inc. (NASDAQ:AAPL) and Microsoft Corp. (NASDAQ:MSFT) combined.
Yet, Nvidia’s market cap sits about 29% below that pair’s combined $7 trillion-plus, according to Benzinga Pro.
The ‘Paltry’ Dividend Problem
Arya argues the disconnect is partly self-inflicted.
Over CY22-25, Nvidia returned just 47% of free cash flow to shareholders via dividends and buybacks, well below the 80% peer average and even Nvidia’s own 82% historical mark from CY13-22.
The current dividend yield sits at a “paltry” 0.02%.
BofA suggests Nvidia could lift that yield to 0.5%-1% — in line with Apple’s 0.4% and Microsoft’s 0.8% — at a cost of just $26 billion to $51 billion, or 11%-21% of CY27 free cash flow.
The move would broaden ownership: Nvidia is held by only 16% of equity-income funds, versus 32% on average for tech peers, according to the firm.
Headwinds Acknowledged
Arya conceded two overhangs.
- Nvidia now represents 8.3% of the S&P 500 — above prior peaks for Apple (7.9%) and Microsoft (7.2%) — which may cap incremental buying.
- Competition from AMD and custom ASICs from Broadcom, Alphabet‘s Google and Amazon‘s AWS is also intensifying.
Still, BofA expects Nvidia to retain 70%-plus AI value share, supported by $95 billion-plus in strategic prepayments and its 100-plus optimized software libraries.
NVDA Price Action: Nvidia shares were up 2.40% at $213.27 at the time of publication Monday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
Photo: JRdes / Shutterstock
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