Investing.com -- Bank of America expects Nvidia (NASDAQ:NVDA) to modestly exceed earnings expectations when it reports fiscal fourth-quarter results on February 26.
However, the bank’s analysts caution that near-term headwinds could weigh on its first-quarter outlook.
“We expect a modest FQ4 beat but F1Q outlook could face headwinds from Blackwell transition, Hopper declines, and China restrictions,” BofA analysts wrote.
While Nvidia’s stock could see post-earnings volatility, they anticipate positive momentum to resume as investors look ahead to its next-generation product pipeline.
BofA maintains Nvidia as its top sector pick, emphasizing the company’s unique position as a “computing platform” rather than just a chipmaker.
The firm highlights Nvidia’s ability to integrate hardware and software optimizations, which it sees as crucial in the rapidly evolving AI market.
BofA believes Nvidia’s valuation “remains compelling” at 31x/24x projected earnings for 2025 and 2026, sitting at the lower end of its historical 25x-56x price-to-earnings range.
They note that the upcoming GTC conference on March 17 could serve as a key catalyst, where Nvidia is expected to showcase its GB300 and Rubin chips and expand its total addressable market into robotics and quantum computing.
Meanwhile, the broader semiconductor sector continues to show strength. BofA notes that the Philadelphia Semiconductor Index (SOX) rallied 3% last week, outperforming the S&P 500’s 1.5% gain.
They add that diversified industrial and auto semiconductor stocks, particularly those with lower exposure to AI, have benefited from European market recovery, China stimulus measures, and reduced industrial inventory concerns.