BofA/Merrill Lynch raised its price target on NVIDIA (NASDAQ: NVDA) to a street-high $185.00 (from $155.00) while maintaining a Buy rating after hosting CFO Colette Kress at BofAML’s Global Tech Conference on June 6th where the tone was "very positive on growth and execution." The analyst sees further upside in the shares coming from gaming, data center, expanding ownership.

Vivek Arya notes the new PT is 42.5x 2018E pf-PE ex cash (up from 35x and higher than sector’s 20x-25x multiple, but inline with NVDA’s current trading range) as they see strong upside to Street’s 2H and 2018 estimates, with $7 in l-t EPS power.

The analyst notes while shares are trading at a premium multiple, the momentum could persist given:

(1) Only 17% ownership by large-cap active US managers (vs. large-cap semi comps 25%-39% ownership – see Chart 1);

(2) Potential expanding ownership by Softbank vision fund, per media reports; and

(3) Scarcity value as the only proven way to gain exposure to nascent AI/machine learning trend which could be a 10-20x growth opportunity.

Further, the analyst notes this weekend’s E3 gaming show typically marks start of 2H seasonal strength.

The analyst sees 2nd-half gaming upside from ASP-strength plus the Nintendo console.

Arya notes NVDA-based GeForce gaming card has gone to $180 from $140. They believe this has the potential to get toward $200 nearterm and $300 over-time based on:

1) low, <20% penetration of NVDA Pascal cards which have median price >$250 (GTX 1060) and range from $137-$750;

2) Microsoft’s impending Scorpio console launch could further raise bar for gamecard performance and expand NVDA Pascal adoption since 95% of NVDA installed base has performance below Scorpio;

3) Rapidly increase interest/momentum in eSports leagues (incl. NBA exploring China eSports league); and 4) expanding use-case of $200+ GeForce cards for cryptocurrency (Ethereum) mining