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Why Nvidia Stock Bounced Back on Thursday

By Rich Smith – Jan 6, 2022 at 12:51PM

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It's Bank of America's "top compute pick."

What happened

Bouncing back from a two-day sell-off, shares of semiconductor star Nvidia (NVDA 1.03%) 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.

Team of videogamers cheering.

Image source: Getty Images.

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 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.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia. The Motley Fool has a disclosure policy.

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