1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders In Q2 2024: 179
NVIDIA Corporation (NASDAQ:NVDA) is the world’s largest and most valuable GPU designer which also has exposure to the tangential data center networking, autonomous driving, and consumer and professional graphics industries. Its high performing GPUs have allowed NVIDIA Corporation (NASDAQ:NVDA) to become the third most valuable company in the world in terms of market capitalization. Its GPUs are one of the hottest commodities in the world, which provides the firm with a wide moat. However, their short supply and the rush in the industry to implement AI software have also forced companies to look for alternatives to NVIDIA Corporation (NASDAQ:NVDA)’s products. This has seen firms like OpenAI work with Broadcom to design NVIDIA Corporation (NASDAQ:NVDA) GPU alternatives. Additionally, the firm can see stricter action by the US government for purported abuse of market power as well as an AI slowdown or a GPU glut to create further headwinds for NVIDIA Corporation (NASDAQ:NVDA)’s shares that have lost 23% since mid June. However, the firm’s key competitive advantages because of its strong product performance and established demand for its products make NVIDIA Corporation (NASDAQ:NVDA) less risky than most of the stocks on our list.
Artisan Partners mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter. Here is what the fund said:
“NVIDIA’s year-to-date dollar value increase is $1.8 trillion. That’s equivalent to the 2023 increase in US GDP, which is, of course, representative of the collective economic efforts of about 330 million people. NVIDIA’s market cap is now $3 trillion. So is the GDP of France.
Does this make any sense? We wish that we could definitively say that it doesn’t, given that we don’t own NVIDIA. But the answer is more complicated. The growth in revenue and profits at NVIDIA has been stunning. In the calendar year 2020, its revenue was about $17 billion. Estimates for 2024 are around $120 billion. Operating profit is projected to reach about $80 billion in 2024 versus $4.5 billion in 2020. NVIDIA’s revenue essentially represents the capital spending of a small number of very profitable, very cash-rich technology companies buying up the processors necessary to power artificial intelligence (AI) software programs. It’s an AI landgrab. In order for NVIDIA to sustain these levels of revenue or grow them from here, these AI investments must start to generate an ROI for those splashing out $120 billion a year. And if not generating an ROI in the near term, those companies must at least see the prospect of an ROI, a clear sustainable competitive advantage or a moat of some kind.”
NVDA tops our list of high risk and high reward stocks. But 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 NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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