Nvidia (NVDA) Stock Trails Semiconductor Index by 68% — BofA Sees Major Buying Opportunity

Key Takeaways

Table of Contents

BofA maintains Buy rating on NVDA with a $350 price target, suggesting 78% potential upside
NVDA has risen only 4% year-to-date compared to the SOX index’s nearly 72% rally
Analyst Vivek Arya believes fears around memory expenses and ASIC threats are exaggerated
GPU accelerator revenue has expanded 700-fold since custom ASICs debuted in 2015
The upcoming earnings report could serve as a positive turning point for sentiment

Nvidia has posted a modest 4% gain so far in 2026, a sharp contrast to the SOX semiconductor index’s impressive 72% climb. For a company that remains the leader in AI chip technology, this performance gap stands out.

NVIDIA Corporation, NVDA

Vivek Arya, a Bank of America analyst ranked among the top 2% on Wall Street, believes this underperformance is unjustified. He’s backing that conviction with a $350 price target on NVDA. With shares trading near $197, BofA’s forecast implies approximately 78% upside potential.

Arya identifies four primary worries affecting investor sentiment: gross margin erosion from elevated memory expenses, threats from custom ASIC chips, concentrated institutional positioning, and inefficient capital deployment through vendor financing arrangements.

His assessment? These concerns are either blown out of proportion or fundamentally misunderstood.

Regarding memory expenses, Arya points out that while HBM costs per rack may increase by $0.2–0.3 million in the transition from Blackwell to Rubin platforms, rack pricing could simultaneously jump $2–3 million — rising from approximately $3–4 million to $6–7 million. This pricing leverage, according to his analysis, should sustain gross margins around the mid-70% level.

The ASIC Narrative Is Familiar Territory

Custom ASIC competition exists, but it’s hardly a fresh development. Google introduced its TPU back in 2015. Amazon entered with Trainium in 2020. Meta launched MTIA in 2023. Despite this succession of competitors, Nvidia’s GPU accelerator revenue expanded 700 times over.

The company’s most recent segment disclosures reveal hyperscaler sales jumped 115% year-over-year — essentially double the pace of cloud capital expenditure growth. Arya interprets this as evidence of market share gains, not erosion.

The fundamental distinction between GPUs and ASICs, he emphasizes, comes down to versatility. ASICs are engineered for narrow workloads within a single hyperscaler’s infrastructure. Nvidia delivers a platform with universal compatibility. Arya projects Nvidia will command 65–70% of AI capital spending over the long haul, with the remaining 30–35% divided among ASICs and competitors like AMD.

Regarding ownership concentration, roughly 78% of active S&P 500 funds hold NVDA positions, at a 1.15x weighting. Strategic investments total approximately $65 billion. While Arya recognizes these as potential headwinds, he calculates the investments consume under 35% of free cash flow, preserving capacity for share repurchases and dividend distributions.

Upcoming Earnings Report Takes Center Stage

Arya is highlighting the approaching earnings announcement as a potential catalyst for sentiment reversal. He anticipates it will “reinforce Nvidia’s competitive advantages in products, pricing power, and supply chain execution.”

At present valuations, NVDA trades at 18x forward earnings — marking a seven-year low. Its large-cap technology counterparts — Amazon, Meta, Google, Microsoft, Apple — command an average forward PE of 22x–19x on CY27/28 projections. That represents a 30–35% premium over Nvidia, which Arya considers unwarranted given the company’s growth trajectory.

Wall Street consensus supports this view. Among 37 analyst ratings, 36 recommend Buy and one rates Hold. The consensus price target stands at $309.33, implying 57% upside over the next twelve months.

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