• Nvidia's recent stock decline stems from investors "misreading the numbers," according to Bank of America.
  • The chipmaker's free cash flow surged 60% quarter-over-quarter to over $22 billion, underscoring strong underlying demand.
  • BofA maintains its Buy rating and $275 price target, dismissing concerns over receivables and inventory as the company ramps Blackwell shipments.

Nvidia Corp.'s recent stock volatility reflects a market misreading of fundamentally strong quarterly results, Bank of America Corp. asserted in a note to clients. Analyst Vivek Arya characterized the pullback as an overreaction, urging investors to focus on the company's massive cash generation and dominant market position rather than peripheral metrics.

Arya specifically addressed concerns about rising receivables and inventory levels that had spooked some investors. "Days sales outstanding improved slightly, and the inventory build is a function of Nvidia ramping shipments of its complex Blackwell AI systems," he wrote, according to the note. The inventory accumulation is seen as a necessary step to fulfill orders for these sophisticated AI platforms, rather than a sign of weakening demand.

The core of BofA's bullish thesis rests on Nvidia's staggering free cash flow, which jumped to over $22 billion last quarter. This 60% sequential increase demonstrates the company's pricing power and operational efficiency amid soaring demand for its AI accelerators. Despite growing attention on competing technologies like Google's TPU chips, Arya noted that Nvidia's GPUs remain the foundational hardware across all major cloud platforms and for the vast majority of large language model training.

Efforts to reach Nvidia for additional comment on the market reaction were not immediately successful. The company typically lets its financial results speak for themselves during periods of market volatility.

While near-term price swings may continue, BofA's analysis suggests the fundamental growth trajectory for Nvidia remains intact. The firm's $275 price target implies significant upside from current levels, betting that the market will soon recognize what it views as a misinterpretation of strong underlying financials.

Correction: An earlier version of this article misstated the quarter in which Nvidia reported earnings. The results were for the third quarter of 2025.