Nvidia (NASDAQ:NVDA) is experiencing a very different 2025 compared to recent years. Instead of racking up gains, the stock has come under pressure amid growing concerns that its era of explosive growth may be fading, compounded by uncertainty over tariffs.
Bank of America analyst Vivek Arya believes Nvidia and its U.S.-based AI peers could face a 20% hit to the projected ~$500 billion AI infrastructure market by 2028–2029. About half of that impact stems from reduced access to the Chinese market, given China’s key role in global cloud spending. The remaining 10% is uncertain and depends on how strictly the U.S. government enforces AI export controls.
Recent media chatter suggests that GPUs might be used as bargaining chips in trade negotiations with Tier 2 countries. If that’s the case, Arya sees a possible shift toward a more lenient stance on AI diffusion, potentially softening the blow.
As for the remaining 80% of the AI infrastructure pie – approximately $400 billion – Arya believes about 60% will come from continued investment by Tier 1 markets (the U.S. and 18 allied countries) in both traditional and emerging cloud AI infrastructure. Based on Arya’s industry conversations, the remaining 20% is expected to come from on-premise enterprise deployments. Arya adds that his $500 billion TAM estimate is conservative relative to Nvidia’s $1 trillion data center infrastructure capex forecast presented at its recent GTC event.
Looking ahead to Nvidia’s F1Q May 28 earnings release, while the geopolitical landscape “remains in flux,” Arya expects a modest Q1 beat, with sales around $44 billion vs. consensus at $43 billion. For Q2, the analyst anticipates sales will be roughly flat sequentially – around $44 billion or slightly lower – falling short of the $46.9 billion consensus estimate, partly due to the recent H20 export ban to China.
Gross margin headwinds are also a factor. Increased U.S. insourcing and potential revenue softness could keep second-half GMs closer to 72%, below the Street’s 73% forecast and the company’s “prior soft guide” for a mid-70s recovery. As a result, Arya expects FY26E (roughly CY25E) pro forma EPS estimates to be revised down across the Street by about 10%, moving closer to his own forecast of ~$3.97 vs. the current consensus of $4.43 and his earlier bull-case of $5.
Even so, Arya is sticking with his bullish stance, noting: “Despite unwelcome but now largely expected eps reset, we find stock compelling at 29x our CY25E EPS (lower-end of historical 25x-56x) and given unwavering support for mission-critical AI infra investments/even raised capex by major US cloud customers.”
All told, Arya rates NVDA shares a Buy while his price objective stays at $150, implying the stock will gain 32% over the next year. (To watch Arya’s track record, click here)
Nvidia also gets strong support elsewhere on the Street. Based on a mix of 34 Buys, 5 Holds and 1 Sell, the analyst consensus rates the stock a Strong Buy. At $164.23, the average price target makes room for 44% upside in the months ahead. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.