BofA's Vivek Arya makes the bullish case for Nvidia, says generative AI is a long-term play

All right, we start with NVIDIA. Why not? Which is trading higher on a bullish call. B of A securities raising its price target on the tech giant to $190 from $165, reiterating its buy rating. The firm calling NVIDIA a, quote, generational opportunity with a huge competitive advantage in a growing market. The stock already up nearly 180% just this year. And that's after last year where it's something like tripled. Now, here's the analyst behind that call, Vivek Aria. Vivek, welcome. Good to have you with us. Thank you for having me. You know, I guess the question in reply to the idea, I have no question that NVIDIA is going to be a great company for a long time to come. But it has already had that generational moment, it would seem to me. So how do you how do you see it moving multiples higher from here generationally, I suppose? Let me actually tell you a story first. So, you know, the first commercial Internet service started in the U.S. in 1989. Amazon started in 94, Google in 98 and Meta in 2004. The point here is that, you know, you don't just have one or two year technology cycles when you are investing in these real big changes to the technological infrastructure. And we think generative AI is one of those really big technological changes that is going to take time to play out. It is true that it is insanely computationally intensive. You need a very strong linkage between the silicon, the system, the software, the developers. They all need to come together. But this is not something that will just start and end in one or two years. And specific to NVIDIA, in the last two weeks, we had the chance to meet with, we had the chance to interact with and listen to a number of companies in the supply chain to the competitors. And what is coming out very loud and clear is that the opportunity is much larger. The competitive position is much stronger. And then finally, when I look at the stock, right, we have a stock that is trading less than one times earnings growth. And if you were to take an average of the other so-called max seven, they are trading at 1.9 times their average earnings growth for next year. That is why we think that we are in front of a large opportunity. The company is executing well and the valuation is very compelling, even at these levels. Vivek, let me ask you, today is interesting because NVIDIA is doing well, but the rest of the semis are actually struggling and the stocks is lower. What explains that? Yes, Kelly, I think, you know, this week we had the start of earnings. We had one very tough report from ASML, then we had a very strong report from TSMC. Next week, we will have a number of other earnings report from semiconductor companies. And the challenge the industry is facing is that this, you know, one shiny area of AI is doing extremely well, but it is less than 20% of the overall industry, whereas the rest of the industry, which has to do with industrial and automotive and PC and smartphone demand, that is just not doing as well. So I think it's possible that investors are taking a wait and see attitude before we get into the heart of this earnings season. So I think it's that kind of very normal earnings volatility that we usually see. How wide and deep is the NVIDIA moat? Sure. You know, so what I think AI is telling us is that it is not just good enough to be a chip maker, right? That you need to make sure that you can scale these chips across the system, that you have software that can be optimized to deliver the best computational performance, that you're taking care of all the energy, right, and the power requirements, that you're working at scale with the supply chain in Asia. And then importantly, that you're working with an enterprise ecosystem. You know, a few days ago, we saw NVIDIA signing the relationship with Accenture, who will train thousands of people to go and deploy NVIDIA-based systems. So I think it takes that end-to-end knowledge, and only one company today is able to deliver that. And this is not something you overcome in a day or a year or two or three years, because NVIDIA has been investing in this kind of silicon and software right from the days when they were just a gaming company. You know, their core operating system called CUDA came out over a dozen years ago. So that's the kind of advantage and lead that they have built, both in terms of their early investments in software and today, their scale and incumbency and partnership with a number of these enterprise software companies and consulting companies.