Bank of America analysts think they’ve spotted what could move Nvidia’s stock next — and it has nothing to do with chips.
The catalyst, according to analysts led by Vivek Arya, is cold hard cash. Specifically, returning more of it to shareholders.
Nvidia is the S&P 500’s largest company by market cap at roughly $5.08 trillion. Yet it trades at nearly a 50% discount to its Magnificent Seven peers on a price-to-earnings basis — 26x and 19x 2026 and 2027 estimates, versus a peer average of 49x and 41.5x.
BofA says that gap is hard to justify on fundamentals alone.
The firm estimates Nvidia will generate over $400 billion in free cash flow across 2026 and 2027 combined — roughly equal to Apple and Microsoft combined. Despite that, Nvidia trades at about a 30% lower market cap-to-FCF multiple than those two companies.
A big part of the problem, BofA argues, is Nvidia’s near-invisible dividend yield of just 0.02%. That keeps the stock out of income-oriented portfolios. According to the analysts, NVDA is held by only 16% of equity income funds, compared to an average of 32% for tech peers.
Over the past three years, Nvidia returned just 47% of free cash flow through dividends and buybacks. Peers average around 80%. Even Nvidia’s own historical average, from 2013 to 2022, was 82%.
BofA says lifting the yield to somewhere between 0.5% and 1% — in line with Apple’s 0.4% and Microsoft’s 0.8% — would require only $26 billion to $51 billion, or 15% to 30% of projected 2026 free cash flow.
That’s a manageable ask for a company of this size.
The analysts note that a more aggressive capital return program could broaden NVDA’s investor base, signal earnings sustainability, and help close the valuation gap.
Nvidia’s S&P 500 weighting has climbed to approximately 8.3%, above prior peaks for Apple and Microsoft. That limits how much index-aware investors can add to their positions.
Competition from AMD, along with custom chip development from Broadcom, Google, and Amazon, remains a watch item. BofA still expects Nvidia to hold more than 70% AI value share.
On the institutional side, Massachusetts Financial Services trimmed its NVDA stake by 6.4% in Q4, though the stock still represents 4.0% of their portfolio at $12.52 billion.
Insider selling picked up last quarter. Directors sold large blocks, with insiders disposing of 953,976 shares valued at approximately $171 million. Insiders now hold 4.17% of the company.
Nvidia’s last quarterly earnings showed revenue of $68.13 billion, up 73.2% year-over-year, with EPS of $1.62 beating estimates of $1.54. NVDA opened at $208.28 on Monday, near its 12-month high of $212.19.
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