1. NVIDIA Corporation (NASDAQ:NVDA)
Latest Fiscal Year Annual Growth Rate: 125.85%
Bridgewater Associates’ Q1 2024 Investment: $636 million
NVIDIA Corporation (NASDAQ:NVDA) is unsurprisingly the top revenue growth stock in Ray Dalio’s portfolio. The firm’s fortunes have soared due to the strong demand for its AI GPUs, which are industry leading when it comes to performance. One particular competitive advantage of NVIDIA Corporation (NASDAQ:NVDA)’s GPUs is the CUDA platform. CUDA is the firm’s proprietary software which enables users to use the chips for AI and other associated workloads. NVIDIA Corporation (NASDAQ:NVDA) also benefits from close ties to its customers, through which it guides them on the most efficient ways in which to use its products. CUDA sets it apart from products from smaller rival AMD, and it has allowed it to target some of the biggest firms in the world with its products.
However, the fact that its products are pricey and that its biggest customers have adequate resources to develop their own AI chips means that NVIDIA Corporation (NASDAQ:NVDA) is constantly in a rush to launch the latest products and prove its mettle. Big ticket firms the likes of Microsoft, Google parent Alphabet, and Facebook parent Meta have all designed and used their custom chips or are designing their own chips, even for AI workloads. This makes the future quite interesting for NVIDIA Corporation (NASDAQ:NVDA).
Baron Funds, whose largest investment position was in NVIDIA Corporation (NASDAQ:NVDA) as of Q1 2024 end, was cognizant of the firm’s innovational lead when it comes to the well known S Curve. Here is what the fund said in its Q1 2024 investor letter:
We are early on the adoption S-curve – most companies are still in the proof of concept stage while very few are ready for production today. Hurdles in implementing AI include data prep, model adaptation and fine-tuning, and embedding of AI into existing workflows. There is a lot of innovation taking place to reducing these hurdles – from tools and infrastructure that help companies build and run AI models more easily, to third-party AI models exposed via Application Programming Interfaces (APIs) that enable companies to use them without building their own models from scratch. NVIDIA’s ecosystem across developers, system integrators, cloud providers and independent software vendors, and internal software innovation are lowering these hurdles as well. For example, one of the most interesting announcements at the GTC conference were NVIDIA Inference Microservices – or NIMs, which are APIs to easily access open-source models (NVIDIA already has dozens of models available) without the need to worry about model optimizations, security, patching, or sending data to third parties. NIMs could ease AI adoption for enterprises while also driving incremental monetization for NVIDIA, priced at $4,500/GPU or at $1/GPU hour if used on the cloud, and increase the stickiness of NVIDIA’s platform.
While NVDA is an unsurprising Ray Dalio growth stock, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None.
