We recently published a list of the top 10 AI stocks to watch based on the latest earnings and analyst ratings, and NVIDIA Corp (NASDAQ:NVDA) ranked third on the list, so it’s worth taking a closer look.
Tom Lee, co-founder of Fundstrat Global Advisors, said on CNBC’s latest show that the weeks leading up to the US election will be “confusing” for many because no one can say for sure who will be in the White House.
Lee said he expects “some” rate cuts at the upcoming Fed meeting because the labor market needs help and inflation data is favorable, and that the market will “do well.” Asked whether he expects a 25-bps or 50-bps cut, Lee said:
“25 or 50 could have hawkish or dovish connotations, so I think ultimately it will depend on whether Fed Chairman Powell communicates that he is confident that this is the start of a cycle and that we are moving back to neutral. Whatever number they put out, it will be pretty dovish and positive. But if it looks like it is holding back FOMC members and even concerns about a hard landing, I think the market will view their actions negatively.”
But Lee said he believes the outcome will be positive.
In this article, we’ve selected the top 10 trending AI stocks based on their latest earnings and analyst ratings. For each company, we’ve noted the number of hedge fund investors. Why are you interested in stocks that hedge funds are flocking to? The reason is simple: our research shows that you can outperform the market by mimicking the top stocks picked by the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
Close-up of a colorful high-end graphics card plugged into a gaming computer.
NVIDIA (NASDAQ:NVDA)
Number of hedge fund investors: 179
Speaking at the Goldman Sachs Communacopia+ technology conference, NVIDIA (NASDAQ:NVDA) CEO Jensen Huang said that $1 trillion worth of commodity data centers will inevitably move to accelerated computing.
“We are in the midst of a computing revolution,” Huang said, noting that the first wave of data center modernization is being driven by generative AI, which he said is a skill, not just a tool.
Huang also emphasized the need for “densification,” saying NVIDIA Corp (NASDAQ:NVDA) is looking to make data centers more efficient by compressing them into a smaller space. He discussed NVIDIA Corp’s (NASDAQ:NVDA) new Blackwell chip system, which is expected to begin full production and shipping in the fourth quarter and has seen strong demand from customers eager to deploy it.
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Nvidia’s performance decline after the latest quarterly earnings report was more or less expected amid a Blackwell delay that management acknowledged. However, the delay is mainly due to a change in the Blackwell GPU mask, which analysts say does not affect the chip’s main functional logic or design. Blackwell is several months late, but it doesn’t change Nvidia’s core growth thesis.
As data centers grow rapidly amid the wave of AI, NVIDIA is expected to experience significant growth.
At Nvidia’s GPU Technology Conference in March 2024, CEO Jensen Huang estimated annual spending on data center infrastructure at about $250 billion. Over the next decade, this investment could reach $1 trillion to $2 trillion, depending on how long this level of investment continues. During the same Q&A session, Bank of America’s Vivek Arya echoed this estimate, suggesting that the total addressable market will be in the $1 trillion to $2 trillion range, especially as countries invest in their own AI infrastructure. Ten years from now, spending could hit the higher end of that range.
Of course, Nvidia won’t have the entire $2 trillion opportunity to itself, as it faces competition from companies like AMD and home-grown AI accelerators from Google, Amazon, and even Apple. Some analysts predict Nvidia’s data center market share could exceed $950 billion between 2025 and 2029. That’s less than half of the total market, but still enough to make it the leader in the field.
In its Q2 2024 investor letter, Ithaka US Growth Strategy said the following about NVIDIA Corporation (NASDAQ:NVDA):
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the manufacture of high-performance graphics processing units (GPUs). The company targets four large and growing markets: gaming, professional visualization, data center, and automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including data center acceleration, artificial intelligence (AI), machine learning, and autonomous driving. The stock price rose this quarter for two reasons. First, the stock price rose due to high expectations surrounding the further development of generative AI and the possibility that this will require large purchases of NVIDIA products in the future. Second, NVIDIA again reported earnings guidance that beat market expectations(1), demonstrating the company’s dominance in building today’s accelerated computing infrastructure.”
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks third on Insider Monkey’s list of “Top 10 AI Stocks to Watch Given Latest Earnings and Analyst Ratings.” While we acknowledge the potential of NVIDIA Corp (NASDAQ:NVDA), we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than NVDA but still trade for less than five times its earnings, check out our report on the cheapest AI stocks.
Read next: Analysts see a new $25 billion “opportunity” for NVIDIA, and Jim Cramer recommends these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
