Bank of America analysts raised their price target for Nvidia stock to $190 a share this week.
They see the AI market growing to $400 billion, giving Nvidia a "generational opportunity."
They point to Nvidia's strong lead among competitors, helped by its enterprise partnerships.
Nvidia stock has been on a tear all year, but investors can brace for even more gains ahead, Bank of America analysts say.
In a Thursday note, the analysts raised their price objective on the stock from $165 to $190. That implies a 38% upside from its price of about $138 a share at midday on Friday.
The analysts point to exponential growth in the AI market in the coming years, which they say will give Nvidia a "generational opportunity" as the chip titan continues to strengthen its lead in the market.
The analysts see the AI accelerator market growing to $280 billion by 2027, and toward upwards of $400 billion over time — marking huge growth from $45 billion in 2023.
As AI models continue to grow rapidly—with developers like OpenAI, Google, and Meta launching new large language models several times per year—the need for computing will only grow, the analysts predict.
Each new major LLM generation, especially those developed for larger size and better reasoning capabilities, will require greater training intensity, they add.
"We continue to see the pace of new model development increase. LLMs in particular are being developed for both larger size and better reasoning capabilities, which both require greater training intensity," the analysts said.
They also point to Nvidia's strong partnerships with enterprise customers like Accenture, ServiceNow, Oracle, and others, which show the growing presence of AI at big companies and Nvidia's role as partner of choice.
"NVDA's engagements span multiple verticals (e.g., Accenture, ServiceNow, Microsoft), and offerings such as AI Foundry, AI Hubs, NIMs are key levers to its AI leadership, not only on the hardware side but also on systems/ecosystems side," the analysts said.
The analysts also said Nvidia's financials are set up well for future gains. Given its free cash flow generation at 45%-50% margins, which is nearly double that of other Magnificent 7 stocks, Nvidia will be able to generate $200 billion in free cash flow over the next two years, they wrote.
Nvidia's stock has skyrocketed this year, up 187% as AI continues to boom after a brief sell-off over the summer. The sector has since recovered, with chip stocks like Nvidia and TSMC trading at or near all-time highs in recent weeks.
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