Bank of America argues that NVIDIA's current valuation of 18x forward earnings already reflects market concerns about margin compression, custom ASIC adoption, and rising HBM costs. The firm expects higher HBM content per rack to be offset by significantly higher system ASPs, maintaining gross margins in the mid-70% range. NVIDIA's GPU revenue has increased 700-fold since Google's TPU launch in 2015, demonstrating its continued market consolidation.
NVIDIA's pricing power extends beyond GPUs to networking and software, allowing it to offset rising HBM costs with higher system ASPs.