Investors are being too hard on Nvidia and passing up an “enhanced” buying opportunity for its stock, according to Bank of America.

Despite dominating the market for artificial-intelligence chips, Nvidia saw its stock rise only about 3% in the year through Monday, while the PHLX Semiconductor Index jumped more than 80% in that time, Bank of America analyst Vivek Arya noted on Tuesday.

He acknowledged various areas of investor concern, although he thinks the market reaction has been overly harsh.

The rising cost of memory components has investors worried about Nvidia’s gross margins, Arya said, but he thinks they are exaggerating the cost pressure stemming from high-bandwidth memory, while not giving enough credit to Nvidia for its pricing power, size and $119 billion worth of supply-chain commitments.

Nvidia could more than make up for the increased cost of HBM chips per rack, because the price of its next-generation Rubin platform could be vastly higher than the price of its current Blackwell offering, according to Arya. He expects Nvidia will be able to keep its gross margin in the mid-70% range.

Investors have also worried about Nvidia’s competitiveness versus custom chip programs, such as the tensor processing units that Google co-designs with Broadcom.

But Arya noted that Google’s TPUs have been around for more than a decade, during which time Nvidia’s revenue from its graphics processing units has risen 700 times. Arya said he expects Nvidia will be able to maintain between 65% and 70% share of the market for hyperscaler spending on AI infrastructure in the long term.

Meanwhile, Nvidia is trading at a discount to peers such as Microsoft and Apple, “despite similar AI opportunities and memory-cost pressures,” Arya said.

Nvidia’s price-to-earnings ratio on a next-12-months basis is 18.69 — almost half its 10-year average of 36.90, according to Dow Jones Market Data. That multiple is also hovering near an 11-year low.

Arya expects that Nvidia’s earnings report in August will show investors that the company still has “its moats in products, pricing and supply chain,” he said.

Nvidia’s stock closed up 3.7% on Wednesday.