Bank of America has a clear message for Nvidia investors ahead of the company's August 26 earnings report: the next product cycle may matter more than the next quarter.

Every few quarters, the debate around Nvidia shifts. For a time, the question was whether AI demand was real. Then it became whether margins could hold. Now, heading into its August 26 earnings report, the focus is whether the company's next product cycle can keep Nvidia, which is already growing at this pace, from slowing down.

Nvidia's recent architecture transitions set a consistent pattern. The Hopper platform — the H100 and H200 — launched the current AI infrastructure buildout in 2023. Blackwell followed with the B100 and B200, driving the revenue figures Nvidia has reported through fiscal 2027. Each transition preceded a multi-quarter acceleration in data center revenue, which is why the timing and execution of Vera Rubin carries weight far beyond a single earnings print.

Bank of America says the cycle can continue. And the bank's latest note, shared with TheStreet on August 7, is worth a close look before the earnings date arrives.

Bank of America Nvidia earnings preview and $350 price target

In the note, Bank of America analyst Vivek Arya called Nvidia (NVDA) his top sector pick ahead of the company's fiscal Q2 FY2027 results. He expects revenue of $94 billion to $95 billion, roughly $3 billion to $4 billion above Nvidia's own $91 billion guidance. That guidance excludes any China data center compute revenue, which means results could be higher if modest shipments to that market resume. Arya also expects third-quarter guidance of $107 billion to $108 billion, above the roughly $104 billion Wall Street is currently modeling.

For context, Nvidia reported Q1 FY2027 revenue of $81.6 billion in May, up 85% year over year, with data center revenue of $75.2 billion. The Q2 guidance of $91 billion pointed to continued sequential growth. BofA's estimate of $94 billion to $95 billion would extend that momentum further.

But Arya's note is not really about the next quarter.

“The commencement of Vera Rubin next-generation chip deliveries marks the beginning of an extended upgrade cycle spanning multiple quarters,” he wrote.

That is the core of the argument: not just a beat, but a new cycle.

Arya has a $350 price target on Nvidia, which implies about 56% upside from $223.96 at the time of the note. He also noted that the stock was trading at about 16 times forward earnings, its lowest valuation in roughly a decade, even as the company's earnings trajectory continues to rise, as TheStreet reported.

Why Nvidia Vera Rubin could trigger a multi-quarter upgrade cycle

Nvidia confirmed at GTC Taipei in June that Vera Rubin has entered full production. The platform combines Rubin GPUs with the new Vera CPU and is expected to be available from cloud partners in the second half of 2026. AWS, Google Cloud, Microsoft and Oracle are already preparing deployments, with OpenAI, Anthropic and SpaceX among the first customers. Nvidia is targeting enough capacity to require 2 gigawatts of power for the buildout, as TheStreet reported. That figure rivals the output of a large commercial power plant and would rank among the largest single-site energy commitments in the technology sector.

Arya also pointed to GPU spot rental prices that are near all-time highs. The B200 is running at about $5.66 per hour, the H100 at $2.80 per hour, and the A100 at $1.64.

That matters because it addresses one of the persistent concerns about the AI trade. If customers can still rent compute at those prices and make money from it, they have a strong incentive to keep buying the next generation of hardware. In that case, the return-on-investment argument becomes less of a deterrent.

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The Vera CPU is the part of Rubin that Bank of America finds especially interesting beyond the GPU story. In an earlier note, the bank called it “the single greatest new addition since the GPU.” Arya's current note projects Vera CPU sales in the second half of fiscal 2027 at about $20 billion, with an annual run rate of $50 billion or more by fiscal 2028. If that outlook holds, Nvidia would become the largest server CPU vendor, a market long dominated by Intel and AMD.

Nvidia gross margin and memory cost inflation outlook for 2027

Memory cost inflation has become one of the louder concerns around Nvidia's margins. DRAM now accounts for 40% to 50% of total production costs, up from 15% to 20% historically. The concern is that as Nvidia moves to more memory-intensive architectures, those higher costs could pressure gross margins faster than the company can offset them through pricing.

Arya's note pushes back on that view.

For Vera Rubin compute racks specifically, the higher memory cost would amount to about 60 basis points of gross margin pressure versus Blackwell Ultra. Gross margins are expected to settle at 73% to 74% over time, down only modestly from about 75% now. That is not the kind of structural margin erosion that would undermine the investment case.

The larger impact is at the pod level. Complete AI pods, which include more memory and storage, could see as much as 500 basis points of margin pressure. But Arya expects that mix to remain small at first. Nvidia's long-term supply agreements with SK Hynix, along with its pricing power given GPU rental rates near record highs, give the company room to pass through costs rather than absorb them.

Nvidia, OpenAI, and free cash flow

Nvidia has committed roughly $70 billion in direct equity stakes to ecosystem partners. That includes $30 billion to OpenAI, up to $10 billion to Anthropic, and $5 billion to Ilya Sutskever's Safe Superintelligence. Some investors have questioned whether these deals are circular, with Nvidia effectively financing customers that buy its chips.

Arya addressed that concern directly.

Against the $70 billion in direct investments, Nvidia is expected to generate roughly $470 billion in free cash flow across 2026 and 2027. The $70 billion would amount to about 15% of that total. According to Benzinga, that still leaves room for Nvidia to return approximately 50% of free cash flow to shareholders while making these investments.

The $250 billion backstop tied to an OpenAI and SB Energy campus in Ohio is different. It is not upfront cash. It is a contingent guarantee that would only be triggered if OpenAI defaults on the lease, with exposure back-loaded to 2028 and beyond. By then, Nvidia is expected to be generating $300 billion to $500 billion in free cash flow per year, which changes how that risk is viewed.

NVDA stock valuation at a decade low and the BofA bull case

At 16 times forward earnings, Nvidia is valued at its cheapest level in about a decade. Bank of America's earnings estimates put Nvidia above $13 per share by 2027 and above $25 by 2030, assuming the AI data center market develops in line with Arya's model. That model assumes Nvidia retains more than 70% share of a market the bank sees growing beyond $1.7 trillion in AI data center systems.

The risks remain real. AMD is gaining ground in AI accelerators, with its next-generation MI400 series targeting the same deployment window as Rubin. Major cloud companies — Google with its TPU line, Amazon with Trainium, and Microsoft with Maia — are building more of their own custom silicon for internal workloads. China export restrictions remain an overhang. Hyperscaler capital spending could also become more uneven if returns on AI infrastructure disappoint.

None of those risks disappear.

For investors watching on August 26, the numbers most likely to confirm or challenge BofA's thesis are whether revenue clears the $91 billion guide, how far Q3 outlook exceeds the $104 billion Street consensus, and what management says about Vera Rubin production timelines and customer demand signals.

But Bank of America's view is that Nvidia has this kind of earnings power while trading at a valuation that does not reflect it. Whether August 26 confirms that or not may matter less than the broader question: whether Vera Rubin delivers what Arya expects.

If it does, this earnings report may not be the end of the story. It may be the beginning of a new one.

Related: Nvidia's CEO just pointed at the part of AI that worries him most

This story was originally published by TheStreet on Aug. 12, 2026, where it first appeared in the Investing section.