In this article, we will talk about the 10 most profitable NASDAQ stocks to invest in.
Is the Market Sentiment Still Bullish?
Recent analysis indicates that an anticipated tech rally may be delayed until year-end, despite the S&P 500 achieving a remarkable 20% increase year-to-date. As September closed, the index rose by 1.6%, defying its historical volatility and showcasing market resilience. Positive macroeconomic indicators are emerging, with upward revisions to Q3 growth estimates and low jobless claims, suggesting a stable economic foundation.
However, concerns about sustaining market momentum without new catalysts persist. Historically, stock prices and price-to-earnings multiples rise together unless disrupted by negative events. As the market approaches traditionally strong months following elections, expectations for a potential year-end rally are building. Despite elevated volatility and geopolitical tensions, investor caution remains. The NASDAQ 100 has surged significantly over the past two years, but this performance does not yet indicate speculative excess. In the last days of September, DataTrek Research co-founder, Nick Colas, joined CNBC to discuss the trading day and highlighted his outlook on the NASDAQ during the conversation. We covered his views in our article on the 10 Best Performing NASDAQ Stocks in 2024. Here’s an excerpt from it:
“…Over the past two years, the NASDAQ 100 has surged approximately 67%, marking a significant recovery since its lows in October two years ago. This performance is substantially above the historical average return of around 25%. Colas emphasized that while such returns are impressive, they do not yet indicate speculative excess; historically, a doubling of the NASDAQ over two years would signal potential trouble for investors.
Looking back further, Colas noted that since peaking before the bear market in November 2021, the NASDAQ 100 has only risen about 20% over three years. This suggests that there may still be room for growth compared to prior bubbles when returns were much more pronounced within shorter time frames.”
In a recent discussion on October 9, Jason Snipe, Odyssey Capital Advisors principal, joined CNBC’s ‘Closing Bell’ to discuss the tech sector’s mega-cap momentum, particularly in light of recent mega-cap stock downgrades and significant investor outflows. Despite these challenges, Jason Snipe noted that the tech sector is having a positive day, attributing this to a combination of improved earnings estimates across various sectors and substantial investments in AI-related capital expenditures. He emphasized that ~40% of operating cash flow is being allocated to AI, raising questions about when these investments will start to yield returns. This focus on AI has contributed to some recent downgrades but also suggests continued upside potential for select names within the sector.
Snipe further defended the tech space by highlighting the profit margins of mega-cap stocks, which average over 23%, compared to just over 8.5% for other sectors. This discrepancy indicates a strong reason for ongoing capital inflows into tech and software companies that demonstrate earnings strength. He acknowledged that while there may be some consolidation and a slowdown in growth, he believes that investors’ muscle memory will eventually lead to a resurgence in these stocks.
When discussing NVIDIA’s recent performance, Snipe pointed to comments made by the CEO regarding the endless demand for their Blackwell chip as a significant catalyst for the stock’s movement. He expressed confidence that it would exceed earnings expectations when they report later in the earnings season. However, Snipe also addressed concerns regarding Amazon, which has seen its stock decline for 8 of the last 9 days. He noted that its retail business appears to be struggling, with retail making up 62% of its operations. Despite this, he highlighted AWS as a bright spot, which reported a 19% year-over-year acceleration. He suggested that competition from other retailers could pressure its retail margins but remained optimistic about the company’s diverse revenue streams, including advertising and subscription services.
Snipe’s analysis underscores the complexities facing the tech sector amid market volatility and evolving economic conditions. While challenges persist, particularly with mega-cap stocks experiencing downgrades, there are also significant opportunities driven by innovation and strong profit margins that could support continued growth in this space. As expert sentiments shift regarding MAG7 and other big tech stocks, other profitable tech companies are maintaining their positive momentum in the market. In that context, we’re here with a list of the 10 most profitable NASDAQ stocks to invest in.
Methodology
We sifted through Finviz to compile an initial list of the top NASDAQ stocks. From that list, we narrowed our choices to 20 companies with positive TTM net income and 5-year net income compound annual growth rates. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Profitable NASDAQ Stocks To Invest In
10. NetEase Inc. (NASDAQ:NTES)
TTM Net Income: $3.97 billion
5-Year Net Income CAGR: 26.92%
Number of Hedge Fund Holders: 35
NetEase Inc. (NASDAQ:NTES) is a Chinese Internet technology company providing online services centered on content, community, communications, and commerce. It develops and operates online PC and mobile games, advertising services, email services, and e-commerce platforms, both domestically and internationally, also providing online music streaming services, intelligent learning platforms, and other internet-related services.
Q2 2024 revenue was $3.57 billion, up 6% year-over-year, driven by the success of games and their expansion across genres and platforms, accounting for $2.8 billion (~76.4% of total net revenue) in revenue, rising 7%. During the quarter, it launched new games and saw record-high daily average users for existing titles in July and August.
The company’s multiplayer survival game Once Human achieved over 230,000 peak concurrent users shortly after launch, ranking among the top 5 games on Steam in July. Shortly after an update in August, it ranked at the top on Steam’s top-seller chart in 12 countries. In late July, it launched Naraka: Bladepoint Mobile, which offers fast-paced combat and an innovative co-pilot AI system. The game quickly gained popularity, reaching the number 3 spot on the iOS grossing chart shortly after its release. Its Hero Shooter and Marvel Rival have also received enthusiastic feedback from players.
Its education technology company, Youdao, will benefit from the AI and tech wave, helping learners across the globe. Prominent tools include Youdao Translation and the Youdao Dictionary Pen. AI integration in game development has led to a 200% year-over-year growth in AI-driven subscription services. Its strategic partnership with Blizzard and the development of new titles are anticipated to contribute to future successes.
This company presents a compelling investment opportunity due to its strong fundamentals, undervalued valuation, and promising growth prospects. Despite recent market volatility, its robust revenue growth, strategic partnerships, and AI advancements position it for continued success.
Polen Emerging Markets Growth Strategy stated the following regarding NetEase, Inc. (NASDAQ:NTES) in its first quarter 2024 investor letter:
“NetEase, Inc. (NASDAQ:NTES) is one of the top players in China’s video game industry and saw decent revenue growth in 2023, particularly in its games division, with profit growth close to 20%. The stock also continues to recover after gaming restrictions announced last quarter in China were not nearly as bad as first feared.”
9. Monolithic Power Systems Inc. (NASDAQ:MPWR)
TTM Net Income: $411.0 million
5-Year Net Income CAGR: 31.11%
Number of Hedge Fund Holders: 35
Monolithic Power Systems Inc. (NASDAQ:MPWR) is a leading provider of high-performance, analog integrated circuits (ICs). Its products are used in a variety of applications, including power management, battery charging, and power delivery. It’s known for its innovative technology and high-quality products, which are essential components in various electronic devices.
Analog chips, essential components in electronic devices, are closely tied to economic growth. Unlike digital chip makers, analog chip producers often manufacture their own chips due to less complex production processes. Analog product cycles tend to be longer, spanning 5-7 years. Days Inventory Outstanding (DIO) is a crucial metric for chipmakers, reflecting supply and demand dynamics. A rising DIO can indicate weakening demand. While this company’s DIO has decreased recently, it remains above its 5-year average, suggesting higher inventory levels.
Over the past 3 years, this company has demonstrated strong revenue growth, averaging 24.2% annually. However, the recent quarter saw a slight slowdown, with revenue increasing from $441.1 million to $507.43 million, up 15.03%. Despite the slowdown, the company made $3.17 per share in this period.
The growth was triggered by strong demand in the automotive and industrial sectors, driven by the shift to EVs. Enhanced production capacity, higher product offerings, strategic partnerships, and economic recovery further boosted sales. Still, given the cyclical nature of the semiconductor industry, long-term investors should anticipate fluctuations in revenue growth.
Monolithic Power Systems Inc. (NASDAQ:MPWR) appears to be well-positioned for continued growth and success. The company’s strong financial performance, positive market outlook, and focus on innovation suggest a promising future. Its stock is up by a considerable 12% over the past 3 months.
ClearBridge SMID Cap Growth Strategy stated the following regarding Monolithic Power Systems, Inc. (NASDAQ:MPWR) in its Q2 2024 investor letter:
“Another top individual contributor was Monolithic Power Systems, Inc. (NASDAQ:MPWR), in the IT sector, which makes semiconductor-based power electronics for the computing and storage, automotive, industrial, communications and consumer markets. Continued demand for AI-related companies and beneficiaries and anticipation of greater demand for data center components such as power management hardware for CPUs helped drive strong performance in the quarter. We believe Monolithic is one of the most attractive semiconductor plays within the SMID universe and that the company will continue to gain share in analog semiconductors as it wins design contracts.”
8. Axon Enterprise Inc. (NASDAQ:AXON)
TTM Net Income: $290.7 million
5-Year Net Income CAGR: 81.03%
Number of Hedge Fund Holders: 36
Axon Enterprise Inc. (NASDAQ:AXON) is a global leader in public safety technology, primarily producing and marketing law enforcement technology solutions, including body-worn cameras, tasers, and evidence management software. Its products are designed to improve public safety, accountability, and transparency in law enforcement agencies worldwide.
Strong demand in the TASER segment, tactical acquisitions, and strategic partnerships contributed to the company’s success. In Q2 2024, Axon Enterprise Inc. (NASDAQ:AXON) posted record revenue of $504.10 million, up 34.57% year-over-year. It booked over $1 billion in new business. The company’s cloud and services segment grew 47% year-over-year. It has seen accelerated demand for various products, including Taser 10, Draft One, and Axon Body 4, and a strategic shift toward software and services, which now make up 39% of total revenue.
Recent acquisitions, such as Sky-Hero and Fusus, have strengthened its technological capabilities and expanded its market reach, adding $27 billion to its total addressable market. These acquisitions align with its existing products and enhance its software platform, driving growth through technology integration.
Despite concerns about a potential economic downturn, the company appears to be well-positioned for continued growth. Its focus on innovation, including AI capabilities and emerging market opportunities, positions it to capitalize on industry trends and deliver long-term value to investors. Shareholders have earned a 40% CAGR over the last 5 years.
Conestoga Capital Advisors Small Cap Strategy stated the following regarding Axon Enterprise, Inc. (NASDAQ:AXON) in its first quarter 2024 investor letter:
“Axon Enterprise, Inc. (NASDAQ:AXON): This manufacturer of the TASER stun gun and body cameras has been among the top contributors to the Small Cap Composite’s total return since first added to the portfolio in 2019. Its market capitalization now exceeds $20 billion. Conestoga trimmed the position over the past few years as the market capitalization rose and, in early 2024, we fully removed AXON from client portfolios.”
7. Arch Capital Group Ltd. (NASDAQ:ACGL)
TTM Net Income: $5.45 billion
5-Year Net Income CAGR: 33.56%
Number of Hedge Fund Holders: 37
Arch Capital Group Ltd. (NASDAQ:ACGL) writes insurance, reinsurance, and mortgage insurance on a worldwide basis, with a focus on specialty lines, the segment of the insurance industry where the more difficult and unusual risks are written. It’s known for its strong financial position, experienced management team, and global reach.
Q2 2024 results from the Property and Casualty segments showcase strong leadership during the hard market. Reinsurance and Insurance combined generated $475 million in underwriting income and $5 billion in gross premiums. Despite higher catastrophic events, Reinsurance generated $366 million in underwriting income. Diversified books of business with higher premium rates contributed to excellent underwriting results. Due to increased storm risk, the company chose not to grow property cat writings at the midyear renewal.
The Mortgage segment generated $287 million in underwriting income, with a 12% increase in new insurance written in the US. The delinquency rate remains low, and credit quality remains high. Arch Capital Group Ltd. (NASDAQ:ACGL) successfully closed the acquisition of RMIC in Q2. While no new business comes with this acquisition, it demonstrates the ongoing pursuit of profitable opportunities.
Overall, the company generated a revenue of $3.78 billion in the second quarter of this year, recording an improvement of 10.30% from a year-ago period. The earnings per share value for the quarter was $2.57.
The company is a well-positioned insurance company with a diversified product portfolio and a strong underwriting strategy. Its Insurance Clock model allows it to effectively navigate challenging market conditions, such as rising climate-related catastrophes and a broader slowdown in the auto industry, suggesting a promising outlook for the company.
Baron Partners Fund stated the following regarding Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q2 2024 investor letter:
“Specialty insurer Arch Capital Group Ltd. (NASDAQ:ACGL) contributed to performance after reporting positive financial results that exceeded Street expectations. Operating ROE was 21% in the first quarter, and book value per share rose 40% due to strong underwriting profitability and the establishment of a deferred tax asset at the end of 2023. Favorable conditions persist in the P&C insurance market with strong growth and attractive returns despite signs of increasing competition. We continue to own the stock due to Arch’s capable management team and our expectation of significant growth in earnings and book value.”
6. Baker Hughes Co. (NASDAQ:BKR)
TTM Net Income: $1.99 billion
5-Year Net Income CAGR: 31.11%
Number of Hedge Fund Holders: 41
Baker Hughes Co. (NASDAQ:BKR) provides products and services for oil well drilling, formation evaluation, completion, production, reservoir consulting, and tubular running services. It plays a crucial role in helping energy companies explore, develop, and produce oil and gas resources.
It benefits from global economic growth that increases oil demand. 63% of its revenue comes from goods and services, making margin control and sizeable orders crucial. To reduce oil dependence, the company is diversifying into other industries like paper manufacturing.
The company has invested in GreenFire Energy, acquiring Advanced Geothermal Systems, which uses closed-loop technology to enhance geothermal energy extraction from wells. Earlier in March, it announced a collaboration with Earths Energy to explore, develop, and commercialize geothermal projects in Australia using its technology capabilities. In Q2, Wabash Valley Resources selected this company as their preferred equipment and service supplier for their ammonia and carbon sequestration plant in Indiana.
In Q2 2024, company revenue reached $7.14 billion, up 13.05% year-over-year, primarily driven by increased volume in both IET and OFSE segments. IET had orders go up 97%, and revenue go up 28%. CTS orders increased by 24%, and new energy orders grew by 31%. OFSC also saw strong growth, with orders up 40%, and revenue up 6%.
Unlike its peers, over 75% of Baker Hughes Co.’s (NASDAQ:BKR) revenue is ex-US, diversifying its customer base and protecting against US-specific downturns. It is capitalizing on the growing geothermal market. Its investment in GreenFire Energy and AGS technology allows it to repurpose existing infrastructure and unlock previously uneconomical projects. This innovative approach, coupled with global reach and industry expertise, positions it for significant growth in the clean energy transition.
ClearBridge Select Strategy made the following comment about Baker Hughes Company (NASDAQ:BKR) in its Q3 2023 investor letter:
“Performance was boosted in the quarter by the Strategy’s more economically-sensitive holdings among steady compounders and evolving opportunities. Oilfield equipment and services provider Baker Hughes Company (NASDAQ:BKR), meanwhile, benefited from a $20 rise in crude oil prices as well as disciplined execution.”
5. Fortinet Inc. (NASDAQ:FTNT)
TTM Net Income: $1.31 billion
5-Year Net Income CAGR: 28.51%
Number of Hedge Fund Holders: 42
Fortinet Inc. (NASDAQ:FTNT) is a leader in enterprise-class cybersecurity and networking innovation, securing 700,000+ enterprises, service providers, and government organizations worldwide. Its products and services include network firewalls, intrusion prevention systems, unified threat management, and advanced threat protection. It’s known for its innovative technology and commitment to protecting customers from the latest cyberattacks.
The company’s total revenue reached $1.43 billion in the second quarter of 2024, a 10.95% increase year-over-year. Service revenue grew even faster, reaching $982 million, up 20% from the previous year. Its investments in Unified SASE and Secure Ops markets, along with the acquisitions of Lacework and Next DLP, primarily drove this strong growth. Service revenue increased by 24%, anticipating a CAGR of 18% for the next 5 years.
The company is investing in AI to enhance threat detection and security monitoring. AI-driven Secure Ops accounted for 10% of total building in the second quarter. Just on October 8, the company introduced Lacework FortiCNAPP, a comprehensive platform to protect cloud applications and infrastructure. It offers enhanced visibility, automated remediation, and threat blocking.
Fortinet Inc. (NASDAQ:FTNT) is on a mission to train 1 million people in cybersecurity by 2026. Through its Training Institute programs, it has already trained over half a million individuals, addressing the growing demand for skilled cybersecurity professionals. The company’s efforts include partnerships with organizations like the European Commission and the All-India Council for Technical Education, as well as providing free training and certification programs.
With a dominant market share of over 65%, Fortinet is well-positioned for long-term growth. The company’s advanced technology, diverse product portfolio, and ability to adapt to evolving cybersecurity threats will drive future success.
Conestoga Capital Advisors Mid-Cap Strategy stated the following regarding Fortinet, Inc. (NASDAQ:FTNT) in its first quarter 2024 investor letter:
“Fortinet, Inc. (NASDAQ:FTNT): FTNT is the worldwide market share leader in network security firewalls (by units). During the quarter, FTNT reported a significant beat in billings, showing early gains from the strategic pivot to non-firewall solutions (SASE, SecOps) announced late last year. This follows two consecutive disappointing quarters, and the stock has nearly recovered to 2023 highs. While FTNT is still digesting a pull forward of product-led growth, the recovery appears to be on the right track and should drive higher than expected margins in 2024.”
4. Charter Communications Inc. (NASDAQ:CHTR)
TTM Net Income: $4.65 billion
5-Year Net Income CAGR: 27.95%
Number of Hedge Fund Holders: 48
Charter Communications Inc. (NASDAQ:CHTR) is a telecommunications and mass media company with services branded as Spectrum. It’s a major cable operator in the US and offers a range of services, including high-speed internet, digital cable television, and home phone services. It’s known for its extensive network infrastructure and focus on providing high-quality services to its customers.
The company has formed a partnership with Warner Bros. Discovery to integrate linear video with streaming services. While facing intense competition in the broadband market, it has successfully expanded into rural areas, driven by government initiatives and its mobile service expansion. It recently reported strong second-quarter results, with revenue reaching $13.69 billion, with a modest 0.19% growth from a year-ago period. Mobile service in particular saw a significant increase of 36.9%. Internet service, the primary revenue driver, experienced a slight growth of 1.3%.
However, in this year’s second quarter, the company saw a fall in its total internet customer base, dropping by 149,000 to 30.4 million. Despite this downturn, the revenue did surpass Street expectations. The mobile sector grew by 557,000 lines, reaching a total of 8.8 million.
As October began, the company partnered with Comcast to provide its cable TV customers with free access to the Peacock streaming service to retain customers amid the growing popularity of streaming services. It also secured deals with other major content providers to offer its customers a variety of streaming options.
The company has demonstrated strong financial performance and a positive outlook despite challenging market conditions. In late September, it explored a potential merger with Liberty Broadband to acquire the Alaskan telecom giant GCI. With stable broadband trends and positive mobile growth, Charter Communications Inc. (NASDAQ:CHTR) is well-positioned for continued success.
Parnassus Value Equity Fund stated the following regarding Charter Communications, Inc. (NASDAQ:CHTR) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE and Charter Communications, Inc. (NASDAQ:CHTR). NICE is a leading cloud contact center software company. Charter’s stock had fallen due to near-term concerns, which we believe will not have a major impact on the long-term value of the business. Charter Communications has had several issues that created short-term uncertainty. We assessed that these issues have limited impacts on the long-term value of the business and initiated a position to take advantage of the stock’s historically low valuation.”
3. Constellation Energy Corp. (NASDAQ:CEG)
TTM Net Income: $2.4 billion
5-Year Net Income CAGR: 35.27%
Number of Hedge Fund Holders: 71
Constellation Energy Corp. (NASDAQ:CEG) is an energy company that provides electric power, natural gas, and energy management services. It primarily operates in the wholesale energy market, selling electricity and natural gas to businesses and other entities.
82% of the company’s shares are owned by institutional investors, suggesting well-researched investments. The top 9 shareholders own more than half of the company’s shares, indicating that the interests of the larger shareholders are balanced out to some extent by the smaller ones, mitigating the risk of a crowded trade where multiple parties compete to sell stock quickly.
The company grew revenue by 0.53% year-over-year in Q2 2024. Constellation Energy Corp. (NASDAQ:CEG) repurchased $500 million of its shares during the second quarter, bringing the total share buybacks for 2024 to $1 billion. It’s investing $800 million to upgrade its Byron and Braidwood nuclear plants in Illinois, increasing energy output by 158 MW, and repowering the Criterion wind project, boosting clean energy production by 79,000 MWh. It also issued a $900 million green bond for nuclear upgrades, clean hydrogen, and energy storage.
On September 23, the company announced a $1.6 billion deal with Microsoft to restart the Three Mile Island Unit 1 nuclear plant by 2028, aiming to extend the plant’s license to 2054. This project reflects the increasing energy demands of AI data centers and Microsoft’s ambitious AI initiatives.
It’s a leading provider of clean, carbon-free energy solutions. The company’s diverse portfolio includes hydro, wind, solar, and nuclear power, capable of powering millions of homes. Recent financial results exceeded expectations, and Constellation Energy Corp. (NASDAQ:CEG) has raised its earnings guidance, making it an attractive investment choice.
ClearBridge Global Infrastructure Value Strategy stated the following regarding Constellation Energy Corporation (NASDAQ:CEG) in its first quarter 2024 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor for quarter, with U.S. electric utility Constellation Energy Corporation (NASDAQ:CEG) and U.S. rail operator CSX the lead performers. Constellation Energy is primarily a nuclear generation company and is the largest producer of carbon-free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation has been a beneficiary of AI and subsequent power demand as its 24/7 base load nuclear generation can get premium contracts.”
2. Netflix Inc. (NASDAQ:NFLX)
TTM Net Income: $7.1 billion
5-Year Net Income CAGR: 43.86%
Number of Hedge Fund Holders: 103
Netflix Inc. (NASDAQ:NFLX) is a subscription video-on-demand over-the-top streaming service, primarily distributing original and acquired films and television shows from various genres. It is available internationally in multiple languages and is known for its innovative approach to content creation and distribution.
It’s a top-performing stock due to its pioneering role in online streaming. The company’s massive and growing subscriber base drives significant revenue growth. It added 8 million new subscribers in the second quarter of 2024, bringing its total paid memberships to 277.65 million. It achieved record UK revenues in 2023, primarily driven by increased subscriber numbers following its crackdown on password sharing.
While it has historically focused on subscription revenue, its recent push into advertising has solidified its position as a strong investment. Q2 2024 revenue increased 16.76% year-over-year to $9.56 billion, and net income grew to $2.1 billion. Netflix Inc. (NASDAQ:NFLX) earned $4.88 per share in the second quarter. It has secured a significant increase in upfront advertising commitments, raised ad prices, and restricted ad frequency to maintain quality. To further enhance advertising revenue, it plans to phase out its ad-free basic plan in the US and France.
Netflix Inc. (NASDAQ:NFLX) is a leader with its vast library of original content, strategic pricing, and focus on popular content. Its expansion into gaming and live sports streaming further diversifies its revenue and enhances customer engagement. Its international expansion and the ability to adapt to changing consumer preferences position it for continued growth and success.
Polen Focus Growth Strategy stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q2 2024 investor letter:
“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”
1. NVIDIA Corp. (NASDAQ:NVDA)
TTM Net Income: $53 billion
5-Year Net Income CAGR: 80.81%
Number of Hedge Fund Holders: 179
NVIDIA Corp. (NASDAQ:NVDA) specializes in graphics processing units (GPUs), which are applied in gaming, artificial intelligence, data centers, and professional visualization. It’s known for its innovative technology and its role in driving advancements in fields like machine learning and deep learning.
Impax Asset Management, a $50 billion asset manager, has increased its stake in NVIDIA Corp. (NASDAQ:NVDA) after underestimating the company’s potential. The firm believes the company is currently undervalued, considering the growing demand for its chips driven by the AI boom. Impax also sees the focus on energy efficiency as a positive factor from a climate perspective.
The company achieved significant growth in FQ2 2025, with revenue surging 122.40% from a year-ago period. The data center segment was the primary driver of this growth, with revenue increasing 54% due to strong demand for NVIDIA Hopper, GPU computing, and networking platforms. Cloud service providers accounted for a significant portion of data center revenue, contributing to the company’s impressive financial performance. Partnerships with healthcare institutions and increasing demand for AI-powered diagnostic solutions also played a role.
Its technology is used by various companies, including NetApp, which recently unveiled a new AI-powered data solution in late September. Elon Musk’s AI startup, xAI, is also utilizing NVIDIA’s H100 GPUs for its Colossal AI training system. Its focus on AI monetization and sustainability initiatives positions the company for long-term success. While the stock may seem expensive, its valuation is reasonable considering its growth prospects.
Vltava Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
While we acknowledge the growth potential of NVIDIA Corp. (NASDAQ:NVDA), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA 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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