Among those concerned about the AI cycle and the future performance of its leading companies, Bank of America is certainly not one of them. The group has published an analysis in which it considers Nvidia’s stock to be undervalued by 34% to 50%. This is an interesting thesis, as the bank sees the new cycle as positive: it begins with Nvidia’s capital and returns to the company in the form of purchases by the companies it finances.

The assumption, therefore, is that the market is unable to price the stock correctly—or is failing to take account of the latest important developments in terms of the financial ecosystem. Nvidia has announced a plan potentially worth $500 billion, although several analysts, including the “bond king” Jeffrey Gundlach, have already voiced significant concerns about it.

What Bank of America expects to happen

The focus is the leading stock of the AI cycle: $NVDA shares. According to the latest analysis published by Bank of America, the market is applying a significant discount of up to 50% to the stock’s fair value.

First, the market is apparently not pricing the stock correctly because of the perception of enormous risks associated with certain transactions, particularly in terms of future financial commitments.

There are also competitors that are beginning to produce proprietary chips. In addition, there are concerns about returns on investment in the AI sector, which could prove lower than expected.

Despite the financial risks involved, BofA still considers Nvidia an inexpensive stock—in the sense that it is underpriced—relative to its current market price.

Buy rating, with a $350 target

Perhaps more importantly, including for those who are not interested in following BofA’s reasoning, the major bank is maintaining a buy rating with a price target of $350. This is decidedly high compared with the current price—approximately 60% higher—but it demonstrates the bank’s strong confidence in the stock.

Amid a sea of bearish sirens, this is certainly a contrarian view, although issuing high price targets costs nothing.

Moreover, banks and Wall Street firms are generally never held accountable for such lofty targets when markets fail to reach them.

In any event, the markets’ attention is focused on a cycle involving not only revenue, but also enormous financial commitments, with Nvidia at the center of both the inflows and the outflows.