It’s too early to say whether rumors of a Department of Justice (DOJ) probe into Nvidia will stop its runaway stock, according to Bank of America.
So for now, investors can rest easy. “Until we have more details, we assume no specific material impact on NVDA’s fundamental opportunity,” Bank of America analysts wrote in a note published on Thursday.
On Tuesday, Bloomberg reported the DOJ sent Nvidia subpoenas relating to a possible antitrust investigation. The DOJ is reportedly looking into whether Nvidia made it harder for buyers of its AI chips to switch to other vendors and whether it unfairly penalized customers that didn’t exclusively use its chips.
In a statement to Fortune, Nvidia denied it had been subpoenaed. “We have inquired with the U.S. Department of Justice and have not been subpoenaed,” a spokesperson said in an email. “Nonetheless, we are happy to answer any questions regulators may have about our business.” The company also said it “wins on merit” and that customers are free to choose “whatever solution is best for them.”
A spokesperson from the San Francisco office of the Department of Justice, which is reportedly overseeing the inquiry, declined to comment, citing departmental policy. Bank of America did not respond to a request for comment.
The supposed inquiry into Nvidia’s dominance in the AI industry began in June, according to Bloomberg.
It is still too early to know the exact nature of the DOJ’s investigation—assuming there even is one—nor whether it will result in a formal complaint. While issuing subpoenas is a clear step in that direction, Bank of America emphasizes that it has “no specific insight into any specific outcome,” leaving it in a holding pattern.
As such, Bank of America reiterated its buy rating, still considering Nvidia a top pick in the tech sector, according to the analyst note. On Thursday, Nvidia’s stock sat at $106.83, having risen 121% this year. Bank of America maintained its price target of $165, which implies the bank still sees 54% upside in the stock. However, over the past five days Nvidia fell 12%.
Bank of America highlighted three points in Nvidia’s favor:
- Its customers had other vendors they could buy from.
- Nvidia’s products are proven to be better than competitors'.
- Demand for AI chips is still booming.
Each of those was meant as some early evidence that Nvidia’s dominance in the chip market was unlikely due to foul play, according to Bank of America.
“Nvidia’s cloud customers are some of the most sophisticated and resourceful in their ability to source chips from multiple vendors, including their internal custom chips,” Bank of America’s note reads.
There is also truth to the fact that Nvidia’s chips do in fact outperform those from its competitors. It regularly scores better than them on the MLPerf industry benchmarks. That led Nvidia to an estimated 75% to 90% market share of the AI chip market, according to CNBC. Last month, as Wall Street eagerly awaited Nvidia’s latest earnings report, there were rumblings that overall demand for AI chips was slowing. Nvidia smashed those concerns when it reported a 122% increase in revenue.
Nvidia is also hardly the only big tech company facing an antitrust probe. Apple and Alphabet are also caught up in cases regarding their business practices—a fact that Bank of America analysts acknowledged, noting that “while every case is different, we also highlight the plethora of government cases ongoing against other large U.S. tech companies over the last several years.”
Stocks for Alphabet and Apple have, so far, remained immune to their respective investigations. This year, Alphabet Class A and Class C shares are up 13% and Apple’s rose just under 20%.
