Nvidia shares are trading at a discount of up to 50% amid AI risks, according to BofA. Is it time to buy?

Nvidia shares could be trading at a discount of up to 50% as investors reassess the risks associated with the market leader in artificial intelligence chips, according to Bank of America (BofA), as reported by Bloomberg.

Even taking into account the risks associated with financing, the bank’s sum-of-parts analysis of Nvidia’s free cash flow shows that the company’s stock is trading at a discount of 34% to 50%, Bank of America analyst Vivek Arya wrote in a note to clients. Such a discount, he estimates, “may indicate an overestimation of risks and create an attractive opportunity” in Nvidia’s stock.

Arya noted that the company recently announced a major investment in AI. For example, it was revealed this week that Nvidia agreed to contribute up to $105 billion to support the construction of a massive data center in Ohio, which OpenAI will then lease. The company also disclosed significant stakes in SpaceX and Intel.

“The strategic goal is clear: Nvidia is committed to the transformative nature of AI and seeks to secure every resource,” including chip supplies, land, and energy, Arya said in commenting on the company’s actions. Such steps will help Nvidia diversify its operations and reduce its dependence on large firms that are currently working on developing their own chips—ones capable of competing with Nvidia’s products—the analyst noted. Such a strategy, he continued, carries both risks and benefits. However, current conditions—namely, “stable GPU rental rates, a shortage of computing power, and Nvidia’s industry-leading free cash flow”—justify the company’s actions, Arya believes.

However, “if demand for AI slows, Nvidia’s growth rate and financial position could come under pressure,” the analyst warned.

At the same time, BofA believes that the “most compelling counterargument”—one capable of allaying concerns about a decline in earnings quality and triggering an upward revaluation of the stock—could be an increase in the portion of free cash flow that the company allocates to share buybacks.

The bank also maintained its "buy" rating on Nvidia shares and its price target of $350 per share—a target that implies a 59% increase from the most recent closing price.

According to Nvidia’s latest report, the company generated $48.55 billion in free cash flow in the first quarter of 2026, with revenue of $81.61 billion— an increase of 85.2% from the previous year. Free cash flow increased 39% year-over-year, while adjusted earnings per share rose 140%, exceeding Wall Street expectations for the 14th consecutive time.

The company is expected to release its second-quarter results next week.

Despite a drop of just over 2% on August 19 amid a broad sell-off in chipmakers and tech stocks, Nvidia’s shares have risen by about 18% since the beginning of the year. However, they remain about 7% below their May high.

Most Wall Street analysts view Nvidia’s outlook positively—62 recommend buying the company’s stock (Buy and Overweight ratings), two more recommend holding, and one recommends selling. Wall Street’s average price target for the chipmaker’s stock—$314.29—implies a 43% increase from the last closing price.

This article was AI-translated and verified by a human editor