Bank of America Securities analyst Vivek Arya said skepticism around artificial intelligence (AI) spending is understandable but overstated, calling it a healthy correction within a long-term growth cycle. The analyst reiterated Buy ratings on leading data center and semiconductor capital equipment stocks — including Nvidia Corp (NASDAQ:NVDA), Broadcom Inc (NASDAQ:AVGO), Advanced Micro Devices, Inc (NASDAQ: AMD (NASDAQ: AMD), Lam Research Corp (NASDAQ:LRCX), KLA Corp (NASDAQ:KLAC), and Applied Materials Inc (NASDAQ:AMAT) — citing their strong leverage to the ongoing AI infrastructure buildout.
He said last week's 7–8% drop in large-cap AI chip stocks was driven by macro noise — such as U.S. government shutdown concerns, weak jobs data, tariff volatility, and misinterpreted OpenAI commentary — rather than any weakness in the AI spending cycle.
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Arya noted that ancillary AI sectors like memory and optical stocks rose about 14% during the same period, while Nvidia's recent $500 billion-plus data center order outlook for 2025–2026 reinforces that AI demand remains robust.
The analyst dismissed claims that AI stocks are overvalued due to OpenAI's ambitious $1.4 trillion long-term spending projections, arguing that these concerns miss the broader picture. He emphasized that most AI-related investments are coming from profitable, publicly traded hyperscalers — including Alphabet (NASDAQ:GOOGL) Google, Microsoft Corp (NASDAQ:MSFT), and Amazon.com Inc (NASDAQ:AMZN) — that view upgrading to accelerated computing as essential for both competitiveness and efficiency.
Meanwhile, private AI firms like OpenAI and Anthropic are rapidly attracting business customers, fueling continued enterprise adoption and pressure on public software and infrastructure providers to expand AI investment.
Arya said Nvidia remains “particularly compelling,” supported by strong data center visibility. Based on its current order outlook, Nvidia could grow sales and earnings per share by 50% and 70% year-over-year in 2026, respectively, while trading at an undemanding 24 times earnings multiple.
If global AI capital expenditures reach even half of Nvidia's $3–$4 trillion projection by 2030, the company could generate over $40 per share in earnings, implying that its current valuation prices in only modest AI growth.
The analyst added that the noise surrounding China restrictions has little relevance to Nvidia's near- and medium-term fundamentals.
Looking ahead, he highlighted two key events. The first event being U.S. Supreme Court's upcoming tariff hearing, which could eventually benefit industrial and automotive chipmakers like Analog Devices Inc (NASDAQ:ADI), NXP Semiconductors NV (NASDAQ:NXPI), Allegro MicroSystems Inc (NASDAQ:ALGM), and MACOM Technology Solutions Holdings, Inc (NASDAQ: MTSI.
The second event is AMD's analyst day, where Arya expects updates on its long-term GPU and CPU growth strategy as the company benefits from expanding AI demand.
Price Action: NVDA stock was trading 3.31% higher at $194.42 at last check on Monday.
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