Nvidia remains top pick on strong AI demand, de-risked China exposure

Nvidia Corp (NASDAQ:NVDA, ETR:NVD) continues to assert its leadership position in the AI infrastructure landscape, addressing key investor concerns and reinforcing confidence in its long-term growth trajectory, analysts at Bank of America believe.

Following a series of investor meetings in San Francisco hosted by the company’s senior leadership, including CFO Colette Kress, VP of Investor Relations Toshiya Hari, and Ian Buck, VP/GM of Hyperscale and HPC Computing, the analysts maintained a ‘Buy’ rating and $180 price target on Nvidia.

The tone of the meetings was "very positive regarding demand and continued customer interest across cloud and enterprise, now also supported by a full-scale supply ramp," analysts wrote.

Nvidia’s ability to maintain momentum in a competitive AI market was underscored by management’s direct responses to three key concerns that have lingered in the investor community: supply execution, AI diffusion and sovereign demand, and exposure to China.

Central to Nvidia’s AI strategy is the rollout of its next-generation rack-scale systems. The bank’s analysts highlighted the significance of the GB200 NVL rack-scale systems ramp, writing that "latest-gen GB200 NVL rack-scale systems are fully ramping today," reflecting strong execution.

Nvidia clarified that its figure of “1,000 racks per week per hyperscaler” includes a backlog of earlier deployments, but emphasized the overall progress is well on schedule. Blackwell-based systems represented approximately 70% of compute sales in the fiscal first quarter.

Additionally, Nvidia confirmed that production of its follow-on Blackwell Ultra (GB300) chips will begin in Q2, with volume ramp expected in the second half of the year.

"Importantly, Nvidia expects easy transition gen-over-gen and limited associated ramp-up costs (i.e. no gross margin headwind)" in moving to future product generations, a critical point of reassurance for investors, according to the analysts.

China de-risked

In the wake of export restrictions and related write-downs, Nvidia emphasized that its China exposure is now largely behind it.

"Post the H20 export restriction and write-offs, China is now fully de-risked for Nvidia, with no China-related sales in their current Data Center forecasts," the analysts wrote.

Instead, Nvidia sees new upside in sovereign AI deployments, especially as governments and public-sector cloud initiatives expand.

"The lift of AI Diffusion Rules opens access to sovereign AI for Nvidia," they noted, adding that the company anticipates each major sovereign will develop its own foundational and frontier models requiring continuous upgrades, mirroring the behavior of commercial hyperscalers.

$250 billion+ pipeline

When quantifying Nvidia’s total addressable market, the analysts highlighted management’s view that each gigawatt of data center installation represents $50 billion of opportunity across its data center stack.

Given the power consumption of Blackwell GPUs and associated infrastructure, Nvidia estimates that a single gigawatt could correspond to roughly 1 million GPUs and $35 billion to $40 billion in hardware revenue, plus another $10 billion from networking and additional components.

With independent estimates suggesting 5 to 7 gigawatts of new data center capacity being added in 2025 alone, Nvidia’s opportunity could span $250 billion to $350 billion, well above its current pipeline estimate of $175 billion.

"We view Nvidia's relationship with hyperscalers as symbiotic, offering a steady stream of compute capability that is both planned ahead and well-executed," Bank of America wrote.

The analysts continue to see Nvidia’s valuation as compelling, despite strong share performance in the year to date.

They continue to view Nvidia as the best-positioned name in the sector, citing a "multi-year lead in performance (AI scaling), pipeline, incumbency, scale, and developer support."

“We maintain Buy, a top sector pick with a $180 price objective as we believe Nvidia remains best positioned to benefit from the ongoing AI tide,” they wrote.

Shares of Nvidia traded hands at about $140 on Thursday afternoon.