<\/p>\n
Nvidia reported earnings on Aug. 26. Wall Street expected it to beat. Bank of America was not particularly interested in that part of the story.<\/p>\n
The firm’s note, published ahead of the report, was really about one thing: whether the market had correctly priced the scale of what Nvidia has been doing with its balance sheet.<\/p>\n
The answer, according to Bank of America, was no. The results Nvidia delivered made that argument harder to dismiss.<\/p>\n
Bank of America’s Buy rating and $350 Nvidia price target<\/p>\n
In a note shared with TheStreet on Aug. 25, analyst Vivek Arya reiterated a Buy rating and a $350 price target on Nvidia, implying roughly 64% upside from where the stock was trading that day.<\/p>\n
The note’s title says everything about where the firm directed investor attention: “Balance sheet disclosures could speak louder than EPS beat.”<\/p>\n
ALSO READ: NVIDIA Corp. Q2 2027 Earnings: Live Updates of $NVDA Earnings Call, Forecast<\/p>\n
Nvidia delivered revenue of $96.2 billion for the second fiscal quarter, up 106% year over year and well above consensus expectations of roughly $92 billion, according to Nvidia’s official earnings release. Data center revenue came in at $89 billion, up 117% year over year. Gross margin held at 75%.<\/p>\n
“AI has reached its inflection point. It’s doing useful work. Its tokens are productive and profitable. Now, compute is revenue,” Jensen Huang said on the earnings call. “And demand is accelerating.”<\/p>\n
Nvidia also returned roughly $26 billion to shareholders in the quarter through buybacks and dividends, with approximately $99 billion remaining under its buyback authorization.<\/p>\n
What the market had not priced properly, Bank of America argued, was the scale of what Nvidia had committed financially to keep the AI ecosystem running.<\/p>\n
Nvidia’s $300 billion AI capital commitments and balance sheet risk<\/p>\n
Nvidia is no longer just selling chips. It is increasingly financing the companies that buy them.<\/p>\n
Bank of America estimated total capital commitments of approximately $300 billion, split between roughly $70 billion in direct equity investments and roughly $230 billion in residual value guarantees and backstops.<\/p>\n
The equity side covers much of the AI supply chain, according to CNBC. The largest single check was $30 billion for OpenAI. Beyond that, Nvidia has invested in Anthropic, Safe Superintelligence, Intel, CoreWeave, Nebius, Lumentum, Coherent, Marvell, Synopsys, Nokia, Corning, and others.<\/p>\n
More Nvidia:<\/p>\n
Nvidia just made a move Wall Street wasn’t ready for<\/p>\n
Nvidia just locked down deal that changes AI race<\/p>\n
Nvidia stock is doing something it hasn’t done in years<\/p>\n
The backstop commitments are the more unusual piece. A $105 billion backstop for SB Energy and a $125 billion backstop for a special-purpose vehicle involving six financial firms were both announced in August, as TheStreet reported.<\/p>\n
Against those numbers, Bank of America estimated Nvidia could generate approximately $469 billion in free cash flow across the next two calendar years. The total committed capital represents roughly 64% of that figure.<\/p>\n
In a scenario where AI demand stays strong, Nvidia may never have to absorb the full economic cost of those commitments at all.<\/p>\n
The worst-case scenario, including purchase commitments and cloud service agreements, puts total obligations at approximately $500 billion. Even that figure represents only about 10% of Nvidia’s enterprise value.<\/p>\n
Nvidia valuation de-rating and AMD comparison<\/p>\n
Nvidia’s forward earnings multiple had collapsed by roughly 44% from its five-year historical median, putting it at less than half the forward multiple of AMD right now.<\/p>\n
The most plausible explanation is that investors were treating the balance-sheet commitments as a tail risk and discounting accordingly.<\/p>\n
Bank of America’s counter was that the market had de-rated Nvidia further than the actual worst-case math justified. The $96.2 billion revenue print and the $108 billion Q3 guidance give that counter argument more support than it had before the results landed, as TheStreet reported.<\/p>\n
In a note shared with TheStreet on Aug. 25, analyst Vivek Arya reiterated a Buy rating and a $350 price target on Nvidia.<\/p>\n
Marcin\/Getty Images<\/p>\n
The Nvidia buyback case and the Apple comparison<\/p>\n
The second catalyst Arya identified was buybacks. The comparison he drew was Apple.<\/p>\n
Over more than a decade, Apple returned the vast majority of its free cash flow and retired roughly 43% of its shares outstanding. That buyback program put a floor under the stock and helped lift its valuation multiple from a low single-digit figure to the mid-twenties.<\/p>\n
Nvidia currently returns roughly a third of its free cash flow to shareholders. Bank of America believes it could increase that to between half and three-quarters.<\/p>\n
The $26 billion returned in Q2 alone, with $99 billion still in the buyback authorization, suggests the company already has the firepower to move in that direction.<\/p>\n
By next year, Nvidia could be generating close to a billion dollars in free cash flow every single day. A larger buyback would give investors a second reason to hold the stock beyond the AI thesis alone.<\/p>\n
What Nvidia’s earnings mean for its customer mix and investors<\/p>\n
One data point the earnings call confirmed was the customer mix story. Amazon Web Services announced it will buy 2 million Nvidia GPUs and adopt the company’s new Vera CPU. That kind of hyperscaler commitment reinforces Nvidia’s customer breadth argument directly.<\/p>\n
Nvidia’s CFO Colette Kress said capital expenditure among the top five hyperscalers is expected to increase to $1.3 trillion next year from $800 billion in 2026.<\/p>\n
That is the demand backdrop Bank of America was betting on when it reiterated its Buy rating. The earnings report confirmed the bet was reasonable.<\/p>\n
What happens to Nvidia’s balance-sheet commitments as that spending cycle plays out remains the more important question.<\/p>\n
Related: Goldman Sachs spots huge twist ahead of Nvidia’s earnings<\/p>\n
#Bank #America #doubles #Nvidia #stock<\/p>\n","protected":false},"excerpt":{"rendered":"
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