In the latest report, BofA senior analyst Ayer pointed out that as "generational opportunities" continue to develop, the share price of artificial intelligence (AI) chip leader NVIDIA still has about 40% room to rise.

Ayer raised NVIDIA's target share price from $165 to $190 and reiterated the "buy" rating. He believes that despite NVIDIA's strong performance this year, investors still underestimate its profitability and cash flow generation potential.

Market position and growth potential

In the report, Ayer emphasized that NVIDIA has a strong ability to generate free cash flow due to its dominant position in AI applications and markets, and its future stock price performance will be further supported. In particular, against the backdrop of increasing corporate demand for AI technology, the market is re-evaluating NVIDIA's long-term potential.

As companies such as Microsoft (MSFT) and ServiceNow (NOW) expand their cooperation with NVIDIA, market demand for its AI chips will continue to rise, further consolidating its leadership position.

Nvidia currently holds 80% to 85% of the global AI accelerator market, which is about $400 billion in size, firmly occupying the leading position in the industry. At the same time, Nvidia's AI hardware and system development is also advancing rapidly, making its influence in the technology ecosystem continue to increase.

Free cash flow and profit forecast adjustment

Nvidia's free cash flow performance is one of the important factors that Ayer is optimistic about the company's prospects. He pointed out that Nvidia's free cash flow margin is as high as 45% to 50%, which is much higher than the average level of 23% to 25% of the seven giants in the technology industry.

Ayer expects Nvidia to achieve more than $200 billion in free cash flow in the next two years, almost comparable to Apple (AAPL), which provides great flexibility and stability for Nvidia's continued growth.

In addition, Ayer raised Nvidia's earnings per share expectations for the next three years. Specifically, the expected earnings per share in 2025 was raised from $2.81 to $2.87, from $3.90 to $4.47 in 2026, and from $4.72 to $5.67 in 2027, reflecting the market's optimistic expectations for Nvidia's profitability.

AI Industry Dynamics and Competitive Advantages

Recent news in the AI ​​field has also strengthened Aya's confidence in Nvidia. In its latest earnings conference, TSMC gave a positive outlook on the prospects of the AI ​​industry, and its unexpected earnings performance pushed Nvidia's stock price up 4% at one point.

At the same time, AMD announced at an AI event that the potential market size of AI accelerators is expanding, showing that demand in the AI ​​market is still growing strongly, which further supports Nvidia's competitive advantage in this field.

Software and hardware integration and strategic cooperation

In addition to its leading position in the field of AI hardware, Nvidia's business opportunities in software and system integration are also expanding rapidly.

Iya specifically mentioned that NVIDIA has played a key role in its cooperation with large companies such as Microsoft, Accenture (ACN) and Oracle (ORCL). These collaborations not only help NVIDIA expand the application scenarios of AI technology, but also further consolidate its dominant position in the market. As corporate demand for AI technology continues to grow, NVIDIA's overall business scale is expected to continue to expand, creating higher returns for shareholders.