The AI arms race gives Nvidia 13% upside as the chipmaker looks poised to lead the nascent sector, Bank of America says

• Bank of America said Nvidia stock is positioned to lead the artificial intelligence arms race.
• The bank raised its price objective for Nvidia to $255 from $215.
• "NVDA's full-stack of accelerated silicon/systems/software/developers positions it uniquely to lead the nascent generative AI arms-race among global cloud and enterprise customers."

Bank of America strategists see long-term growth potential for Nvidia as it looks poised to emerge as a leader in the budding artificial-intelligence arms race.

The firm raised its price objective for Nvidia stock to $255 from $215 on Monday, implying potential upside of 13% from current levels.

"NVDA's full-stack of accelerated silicon/systems/software/developers positions it uniquely to lead the nascent generative AI arms-race among global cloud and enterprise customers," BofA strategists wrote in a note, adding that the adoption of generative AI will quadruple the addressable market opportunity for "AI accelerators."

Shares of the chipmaker have climbed more than 58% year-to-date, and have been part of the broader rally enjoyed by companies with ties to AI, largely driven by the viral language tool ChatGPT.

Since launching in November, it's proven capable of writing real-estate listings, articles, and even dating-app messages. Last month, Microsoft poured in a $10 billion investment into its creator, OpenAI.

"Exponentially rising compute intensity required for training of, and inferencing from, large-language models will require exaflop-class compute with ~35-40% accelerator attach in cloud, similar to today's supercomputers," BofA said.

Nvidia currently maintains about a 75% share of that market, and strategists predicted it can hold a 65% share over the long run.

Even though questions remain about the pace of AI adoption, the bank expects the shift to accelerated computing to continue, and for Nvidia to lead that charge.

"Indeed, NVDA's compute portfolio remains in strong position to power/support these upcoming trends, offering leading cloud/AI accelerators that could see strong demand if Generative AI trends accelerate," BofA wrote.