Shares of Nvidia Corporation (NVDA) saw a notable uplift, increasing by over 2% on Friday. This surge came in the wake of Bank of America’s analysts elevating the semiconductor giant to the status of their preferred choice in the sector. The commendation is largely attributed to Nvidia’s commanding presence in the generative AI (genAI) field.
Bank of America’s analysts predict that Nvidia’s stronghold in genAI could potentially propel the company towards generating an additional $100 billion in free cash flow (FCF) within the coming two years. They anticipate that out of this, between $30 billion and $35 billion could be allocated for stock buybacks. This strategy leaves a substantial amount – approximately $65 billion to $70 billion – for Nvidia to invest in fresh growth ventures, both internally developed and externally acquired.
While highlighting the challenges that typically confront hardware-centric businesses in achieving consistent revenue streams, similar to their large-cap software and internet counterparts, Bank of America pointed out that Nvidia’s robust FCF generation uniquely positions it to effectively tackle these hurdles.
The firm also suggested that Nvidia might explore strategic collaborations or mergers and acquisitions with software enterprises. These potential partners are seen as pivotal in aiding traditional business clients to implement, oversee, and evaluate genAI applications.
In addition to Bank of America’s endorsement, Nvidia has also received favorable assessments from other financial institutions. Jefferies has previously named Nvidia a “franchise pick,” and Wedbush Securities remarked that Nvidia could emerge as a leading, if not the foremost, entity in the AI epoch.
Closing the trading day at $490.97 per share, Nvidia’s stock marked a 2.3% rise and has witnessed a more than threefold increase in its value over the preceding year.
