Bank of America reaffirms its bullish outlook on NVIDIA: Markets are overly concerned about HBM costs and ASIC competition, with the chipmaker’s current valuation near an 11-year low.

U.S. Bank of America’s latest research report states that market concerns over rising high-bandwidth memory (HBM) costs for Nvidia and competition from custom application-specific integrated circuits (ASICs) have been overblown, while the market has underestimated the chipmaker’s strong pricing power, supply chain advantages, and ecosystem moats. BofA believes the upcoming Rubin AI platform will offset HBM cost increases via higher selling prices, and Nvidia’s roughly $119 billion in supply chain commitments will further solidify its cost edge, projecting the company’s gross margin will remain at around the mid-75% range. Regarding the ASIC substitution risk drawing market attention, BofA notes Google’s TPU has developed over a decade, yet Nvidia’s GPU business revenue has grown some 700 times over the same period, demonstrating that custom chips have not weakened GPUs’ dominance in AI training and inference fields. The bank forecasts Nvidia will continue to capture 65% to 70% of global hyperscalers’ AI infrastructure spending going forward. On valuation, BofA points out that Nvidia’s current forward price-to-earnings (P/E) ratio is around 18.7 times, only half of its 10-year average of about 37 times, near an 11-year low, meaning pessimistic expectations are already fully priced in. With the advancement of the Rubin platform and the approaching August earnings report, BofA expects Nvidia will once again validate its product competitiveness and profitability, driving the market to reassign a valuation premium to the stock.