Bank of America: Analyzing their Nvidia forecast
Nvidia's $40 EPS Dream: Bank of America's Bull Case, Decoded
Bank of America's recent projection of Nvidia hitting $40 in earnings per share by 2030 is making waves. It's a bold claim, even for a company that's been defying gravity for the past decade. They're maintaining a "Buy" rating, naming Nvidia their top sector pick, and citing booming Blackwell sales as the primary fuel. But is this optimism grounded in reality, or is it a case of Wall Street groupthink?
Let's dissect the numbers. Nvidia's Q3 fiscal 2026 (ended October) saw revenue hit $57 billion, a 62% year-over-year jump. Data center revenue, the real engine, reached $51.2 billion. Gross margins are sitting pretty at 73.6%, and Nvidia expects to maintain those levels. They're even forecasting Q4 revenue to hit $65 billion, a 14% sequential increase. The networking business more than doubled, clocking in at $8.2 billion. The Blackwell GB300 model accounts for about two-thirds of total Blackwell revenue.
Nvidia claims to have visibility into a staggering $500 billion in Blackwell and Rubin revenue through the end of 2026. That's a huge number, but "visibility" isn't a guarantee. It's a pipeline, not a done deal. How much of that is firm orders versus projections? Details on contract terms and cancellation clauses would be helpful here, but are, unsurprisingly, absent.
Now, for the elephant in the room: valuation. Nvidia's market cap is sitting around $4.4 trillion, making it the biggest company in the world. The stock has delivered close to a 23,000% return in the last decade. Can that trajectory continue? Past performance is not indicative of future results, as the saying goes.
CEO Jensen Huang is betting on a fundamental shift towards accelerated computing and generative AI. He argues that companies are ditching traditional systems for faster, AI-driven solutions. He also highlights the rise of agentic AI systems creating new applications. All major AI deployments, he notes, include Nvidia switches. They've also cleverly positioned themselves with equity stakes in key players like Anthropic and OpenAI.
Here's where my analysis suggests a potential disconnect. While the technological narrative is compelling, the current stock price already reflects a massive amount of future growth. A $4.4 trillion valuation implies near-total dominance in the AI hardware space for years to come. What happens if AMD or Intel, or even a dark horse like a well-funded startup, manages to chip away at Nvidia's market share? (Pun intended.)
And this is the part of the report that I find genuinely puzzling: cloud GPU capacity remains sold out across all generations of Nvidia chips. They're supply-constrained and raising prices. It's a classic case of having your cake and eating it too. How long can they maintain this pricing power? Are they leaving money on the table, or are they maximizing short-term profits at the expense of long-term market share?
The Analyst Echo Chamber
The analyst consensus is overwhelmingly bullish. Out of 47 analysts covering NVDA, 42 recommend "Strong Buy," two recommend "Moderate Buy," two recommend "Hold," and only one recommends "Strong Sell." The average price target is $252.35, significantly above the current price of $181 (as of this writing). Bank of America Forecasts $40 EPS for Nvidia Stock in Just 5 Years. Should You Buy NVDA Here? - Barchart.com
This near-unanimity should raise eyebrows. Are analysts genuinely independent, or are they susceptible to the same hype cycle as everyone else? It's worth noting that investment banks often have other relationships with the companies they cover, which could create a conflict of interest. (This isn't to say there's explicit manipulation, but the potential is always there.)
Let's consider the "Strong Sell" recommendation. What are the bear case scenarios? Overvaluation is one, but what about technological disruption? What if a fundamentally new computing paradigm emerges that renders GPUs obsolete? Quantum computing, perhaps? It's a long shot, but not impossible.
The online sentiment, gleaned from various forums and social media, largely mirrors the analyst consensus. There's a palpable sense of FOMO (fear of missing out) driving retail investors. The narrative is simple: Nvidia is the future, and you need to be on board. But narratives can be dangerous, especially when they're detached from underlying fundamentals.