Bank of America says these five stocks like Nvidia have room to run

Bank of America flagged a group of buy-rated stocks it views as best positioned into year-end, highlighting Nvidia (reiterated Buy and top sector pick with potential for 40%+ EPS growth), Palantir (price target raised to $255 from $215; shares up ~123% YTD, customer counts +45% Y/Y), Robinhood (price target raised to $166 from $157 after a beat; shares up ~245% YTD), Crane (stable industrials with margin expansion and strategic M&A; shares up >20% YTD) and Supernus (initiated Buy, $65 objective on CNS growth). The calls emphasize AI-driven demand and product/TAM expansion for software and fintech names, accelerating growth metrics and raised targets for key stocks, information that could influence relative positioning and sector exposure ahead of year-end.

Analysis

Market structure: AI-driven winners are Nvidia (NVDA) and AI software enablers like Palantir (PLTR), with cloud providers and high-end datacenter OEMs also benefiting as GPU demand outstrips supply—implying persistent pricing power for top GPU SKUs and elevated capex for hyperscalers over the next 6–18 months. Financial winners include Robinhood (HOOD) if retail activity and product expansion sustain fee & margin lift; losers include legacy low-margin chip vendors and smaller brokerages facing competitive pricing pressure. Cross-asset: stronger AI equities should push real yields modestly higher on implied growth expectations (short-term negative for long-duration bonds), raise demand for industrial metals tied to data center buildouts (copper, aluminum), and compress implied volatilities in NVDA/PLTR options after positive earnings beats.

Risk assessment: Key tail risks are regulatory actions (US export controls on AI chips, EU/US antitrust on data platforms) and demand shocks from macro slowdown—each could knock 20–40% off consensus forward EPS in affected names within 3–12 months. Immediate (days) risk: headline-driven vol for NVDA/PLTR; short-term (weeks–months): execution and supply disruptions for chip supply chains; long-term (quarters–years): TAM saturation for HOOD and customer concentration for PLTR (government vs commercial mix). Hidden dependencies include power/cooling constraints at hyperscalers and Robinhood’s sensitivity to retail volatility and interest income.

Trade implications: Establish a tactical 2–4% portfolio long in NVDA (scale in, add on pullbacks of 8–12%, target 6–12 month holding), and a 1–2% conviction long in PLTR for 3–9 months to capture commercial customer acceleration. Use a long CR (Crane) position of 1–2% as defensive industrial exposure and initiate a small 0.5–1% long SUPN for 12–18 month branded-CNS upside. Use options: buy 3–6 month NVDA calls (10–15% OTM) funded by selling 20–25% OTM calls to form spreads if implied vol remains elevated; consider buying PLTR 6–9 month LEAPs for asymmetric upside.

Contrarian angles: Consensus underestimates regulatory and power-infrastructure limits which could cap NVDA’s near-term upside—prepare for multiple compression if GPUs face export curbs or prolonged supply constraints. HOOD’s 245% YTD move likely prices in user growth; downside risk >30% on a single-quarter engagement miss. Historical parallel: early-2010s cloud capex cycles show rapid EPS re-rating followed by 20–40% pullbacks when supply or macro stress appears—trade with disciplined stop-losses and size limits to avoid trend reversals.

Key Decisions for Investors

• Establish a 2–4% long position in NVDA over 2–6 tranches; add additional 1–2% if NVDA retraces 8–12% from entry. Target 6–12 month horizon; consider taking profits if position gains 30–50% or implied EPS revisions slow.
• Initiate a 1–2% long position in PLTR for 3–9 months to capture commercial customer acceleration; hedge 20–30% of exposure with 6–9 month OTM puts (10–15% OTM) if regulatory headlines rise.
• Buy a 3–6 month call spread on NVDA (buy 10–15% OTM call, sell 25% OTM call) sized to 0.5–1% portfolio risk to capture upside while funding premium; roll or unwind if IV drops >25% or price rises >40%.
• Allocate 1–2% to CR (Crane) as defensive industrial exposure with a 12–18 month view; increase on any >10% pullback and trim if M&A execution fails or margins deteriorate by >200 bps sequentially.
• Small speculative 0.5–1% position in SUPN for 12–18 months to capture branded CNS upside; exit or reassess if upcoming quarterly guidance misses revenue by >5% or new product launches are delayed beyond 6 months.