Nvidia Analyst: Stock Still 'Quite Inexpensive,' Expects Chipmaker To Maintain 80%-Plus Share As AI Market 'Triples' Over Coming Years

Nvidia Corp NVDA became the most valuable company in the world by market cap this week. One analyst doesn’t see any signs of a slowdown for the chipmaker, given the significance of its role in the generative artificial intelligence (AI) boom.

What To Know: Thursday on CNBC’s “Squawk Box,” BofA Securities analyst Vivek Arya argued that Nvidia is very likely to maintain a massive lead in the AI race over the coming years.

“We do expect Nvidia to maintain its 80%+ market share. The reason is that this is the norm in technology. If you look at any part of technology, right, whether it’s social, e-commerce, operating systems, you will see that the leader keeps 80% of the market … and we think it’s going to be no different in AI,” Arya said.

The BofA analyst told CNBC that Nvidia currently holds at least 80% of the AI hardware market. Competitors like Advanced Micro Devices Inc AMD and Intel Corp INTC have likely captured about 5% of the market, and the remaining 15% is probably in custom chips, he said.

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Why It Matters: Arya maintained a Buy rating on Nvidia stock on Thursday as he expects shares to continue to be propelled by the generative AI boom. He said we are currently in the second year of what will likely be a three- to five-year deployment cycle.

Many want to draw comparisons to the dot-com boom, but that’s a mistake, he said. That era was fueled by debt, whereas the spending in the AI cycle is being done by some of the biggest companies in the world with incredible balance sheets, he added.

Others want to say Nvidia is overvalued given its remarkable surge over the last couple of years, but it’s still “quite inexpensive” based on some metrics, he said.

Nvidia shares are up 175% year-to-date after more than tripling in 2023, per Benzinga Pro. The broader S&P 500 is trading around two times earnings growth, but Nvidia is actually trading at less than one times earnings growth, the BofA analyst stressed.

“As long as they continue to execute, which we have every confidence they will, we think they should be able to keep over 80% of this market, which in our estimation, could triple over the next few years,” Arya said.

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NVDA Price Action: Nvidia shares were down 1.71% at $133.26 at the time of publication, according to Benzinga Pro.

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