Nvidia's Future Tied to LLMs and Gaming, Despite AI Capex Skepticism, Remains a Sector Favorite: Analyst

BofA Securities analyst Vivek Arya maintained a Buy rating on Nvidia Corp NVDA with a price target of $165.

The price target reflects 42x calendar 2025E PE ex-cash, within Nvidia’s historical 21x-67x forward-year PE range, which Arya noted as justified given more robust growth opportunities ahead as gaming cycle troughs and data center demand potentially face robust and long-term demand dynamics.

Nvidia remains a top sector pick despite fundamental headwinds, including the Blackwell delay, gross margin pressure, and regulatory headwinds like a potential DOJ probe that could suppress the stock.

Arya also flagged perceptional headwinds, including competition, AI monetization, cloud capex, and market headwinds like weak September seasonality, interest rate, and elections.

However, the headwinds could also create an enhanced Buy opportunity, with the stock ~27x calendar year 2025 PE within the lowest quartile of valuation in the past five years versus the median 36x PE.

Arya noted that the critical fundamental recovery catalyst will likely be supply chain data points over the next several weeks, confirming the readiness of new Blackwell product shipments.

Arya maintained skepticism about AI capex and monetization being understandable but fruitless endeavors at least until 2026. The analyst noted that AI capex is not just driving new business opportunities; it’s also critical in protecting existing moats and large profit pools in search, social, and enterprise workloads.

The tech industry will give itself at least another one to two years of intense buildout of the Nvidia Blackwell chip with its 4x list in AI training and 25x+ list in inference, Arya writes.

The industry’s real capability will only come out with next-gen large language models (LLMs) like OpenAI GPT-5 and Meta Platforms Inc’s META Llama 4, as per the analyst.

Price Action: NVDA stock traded up 0.63% at $106.88 at the last check on Thursday.

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