Nvidia Surges Past Expectations, Stock Plummets—BofA Urges Investors to Seize the Opportunity

Nvidia just posted the largest quarterly revenue in its entire history. Yet the stock dropped anyway. This has become a recurring trend—the chipmaker’s shares have fallen following three of its last four earnings reports, despite consistently stronger financial results.

Bank of America remains unconcerned. Lead analyst Vivek Arya and his team reaffirmed their buy rating yesterday, designated Nvidia as a top pick, and boosted their price target from $320 to $350—suggesting a potential gain of 56.6% from the current share price of $223.47.

The headline of the investment note stated: “Beat/raise speaks volumes, ignore noise, buy top pick.”

Before diving deeper, here’s a quick translation for readers unfamiliar with Wall Street terminology. A “beat” means a company earned more than what analysts had forecast. A “raise” means its forward guidance—the company’s own prediction for the next quarter—also surpassed expectations. When both occur simultaneously, it’s generally very, very positive news. The stock’s decline is precisely the “noise” Bank of America is urging investors to disregard.

The quarter by the numbers

Nvidia’s Q1 revenue reached a record $81.6 billion—an 85% jump from the same period last year and a 20% increase from the previous quarter. Analysts had anticipated roughly $79.1 billion. Nvidia surpassed that by 3.1%, or approximately $2.5 billion more, in just one quarter. To put it in perspective: The prior quarter had already set a record at $68.1 billion. Nvidia tacked on an additional $13.5 billion on top of that in just three months.

The driving force behind all of this: data centers—the massive server facilities that power AI models, cloud computing, and virtually everything else on the internet.

Data center revenue alone climbed to $75.2 billion, up 92% year-over-year. That figure is split nearly evenly between major cloud providers like Amazon and Microsoft on one side, and a rapidly expanding group of AI companies, factories, and industrial clients on the other.

Earnings per share—the profit allocated to each outstanding share—came in at $1.87 on an adjusted basis, exceeding the $1.73 analysts had expected. Gross margin, the portion of revenue remaining after production costs, held steady at 75%. Free cash flow for the quarter—the actual cash generated after all expenses—hit $48.6 billion. Jensen Huang remarked during the earnings call: “Agentic AI has arrived, doing productive work, generating real value and scaling rapidly.”

Of course, agentic AI is the breakthrough that everyone on Wall Street is currently buzzing about.

Why BofA remains optimistic

The central thesis isn’t about a single quarter. It’s about the sheer scale of the market Nvidia is selling into, and how quickly that market is expanding.

BofA had previously estimated the total AI market at $1.7 trillion. They now project it will quadruple, surpassing $3 trillion by 2030. Within that landscape, they forecast Nvidia commanding roughly 78% of the AI accelerator market—the specialized chips built to handle AI workloads. That amounts to a near-monopoly in what BofA considers the fastest-growing technology market it has ever analyzed.

There’s also a newer opportunity the bank recently upgraded. Nvidia is expanding into agentic CPU chips: processors designed for AI agents—software capable of autonomously completing complex tasks without human intervention. BofA raised its estimate for that segment from $125 billion to $200 billion, and notes that Nvidia already has $20 billion in demand secured for the second half of this fiscal year.

The demand isn’t hypothetical, either. Customer purchase commitments

reached $145 billion this quarter, a significant jump from $95 billion just three months earlier. AWS alone has pledged to roll out approximately 1 million Nvidia GPUs by 2027. These are firm commitments, not speculative plans.

The risk

BofA outlines six formal risks. Two are particularly worth noting for anyone who owns or is thinking about buying Nvidia stock.

The first is the stock’s own weight in the market. Nvidia now makes up 8.3% of the entire S&P 500 index—the benchmark that tracks America’s 500 largest publicly traded companies. Roughly 78% of active fund managers already hold it. When that many investors already own a stock, the pool of potential new buyers shrinks, making it harder to drive the price higher.

The second is custom chips. Major hyperscale cloud providers like Google, which recently unveiled its eighth-generation AI chips built specifically to lessen reliance on Nvidia, are pouring resources into in-house alternatives. BofA’s response: It still projects Nvidia will command more than 70% of the accelerator market over the long term, arguing that comprehensive platform support and AI factory infrastructure are capabilities that custom chips simply can’t match.

There’s also an ongoing critique that Nvidia’s investments in companies like OpenAI and Anthropic—as a vendor selling them chips—amount to circular spending.

What the numbers look like from here

BofA lifted its earnings-per-share forecasts by 9% for fiscal 2027 (to $9.09) and 15% for fiscal 2028 (to $13.27). To put that in perspective: Nvidia earned $4.55 per share last fiscal year. BofA expects that to roughly double to $9.09 this year, then climb to $13.27 the following year. Earnings per share growing at 43% annually is uncommon for any company, especially one already valued at $5.5 trillion.

At its current price, Nvidia trades at 19.7 times its estimated 2027 earnings. A metric that adjusts the P/E ratio for growth rate—where a lower figure is more favorable—sits at 0.5x compared to a Mag-7 average of 3.9x.

Free cash flow is expected to rise from $96.7 billion last fiscal year to $186.8 billion in 2027 and $282 billion in 2028. The company also boosted its quarterly dividend 25-fold, from $0.01 to $0.25 per share, and announced an $80 billion additional share buyback authorization—bringing total repurchase capacity to roughly $120 billion.

The $350 price target is based on 26x estimated 2027 earnings, within Nvidia’s historical range of 25x to 56x. The next key date on the calendar: CEO Jensen Huang’s keynote at Computex on June 1, where BofA expects him to detail Nvidia’s agentic AI roadmap and CPU strategy.