What happened
Bouncing back from a two-day sell-off, shares of semiconductor star Nvidia (NVDA 3.71%) had booked a 2.2% gain through 11 a.m. ET Thursday.
Declaring Nvidia its "top compute pick" in 2022, Bank of America doubled down on its buy rating on Nvidia stock. Its $375 price target forecasts a 33% run-up for Nvidia shares this year, on top of the more than 100% gain they scored last year.
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So what
A "robust gaming environment" among PC players will work to Nvidia's benefit this year, BofA said in a note covered today on StreetInsider.com. The analyst said 50% of Nvidia gamers are using a GPU more than five years old and really need an upgrade if they want to be able to compete with other video gamers on a level playing field.
BofA sees the biggest opportunity in Nvidia's 7nm Ampere GPUs. Just 14% of gamers have upgraded to the latest Ampere generation, the analyst said. And given that a typical upgrade cycle reaches more than 40% penetration, it said, this implies that Ampere sales could nearly triple existing levels, and at very high profit margins.
Now what
According to Bank of America, the average Ampere chip retails for $482. That's 15% to 75% above prices for Nvidia's previous Turing and Pascal chips, says the analyst, and roughly double the average sales price of other Nvidia chips, which range from $200 to $300. (And other Nvidia chips that could inspire upgrades sell for even more.)
According to StreetInsider, BofA forecasts that "already inflated prices [will] surge even higher as consumers are still willing to pay top dollar to acquire graphics cards." With predictions like these, it's no wonder Nvidia stock is going back up today.
