10 AI Stocks to Watch Amid DeepSeek Impact

2. Nvidia Corp (NASDAQ:NVDA)

Number of Hedge Fund Investors: 193

Dan Niles, Niles Investment Management founder, said in a latest program on CNBC that he believes Nvidia Corp (NASDAQ:NVDA) will see a slowdown in chip demand, especially from major spenders like Microsoft. This would, according to Niles, impact Nvidia Corp (NASDAQ:NVDA)’s revenue growth rates:

“I don’t think there’s any chance that Nvidia, and I’ve said this before, does revenue up 50% this year because, whether it’s Microsoft cutting back on capex, don’t forget they said they’re going to spend 80 billion this fiscal year. Well, if you do the math, they spent 20 billion in September. They said that’s up in December, their fiscal year ends in June, which means the first half of 2025 capex spending is down from the back half of 2024. It’s been growing at 70 to 80% for a year and a half, and that’s a very big change when the largest spender on AI is going from growing 70 to 80% to not growing at all.”

Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.

Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.

Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology.

Infuse Asset Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:

“We do still own some NVIDIA Corporation (NASDAQ:NVDA) as the forward multiple isn’t egregious and it powers over 90% of AI workloads. This company is only becoming increasingly important though the hyperscalers are actively trying to save money through their own ASIC programs. The moat CUDA provides has been underestimated time and time again. While I don’t think Nvidia has quite the upside as some of the other companies in the portfolio, it has a product that the best companies in the world literally can’t get enough of.”