4. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 186
NVIDIA Corp (NASDAQ:NVDA) rapid run and soaring valuation have started to make some circles on the Wall Street uneasy. New Street Research recently downgraded the stock to Neutral from Buy and set the stock’s price target at $135.
“We downgrade the stock to Neutral today, as upside will only materialize in a bull case, in which the outlook beyond 2025 increases materially, and we do not have the conviction on this scenario playing out yet.” New Street analyst Pierre Ferragu said.
NYU professor and valuation guru Aswath Damodoran has also been skeptical about NVDA over the past several months, saying repeatedly that the stock looks overvalued. In March, when he was asked about his previous predictions (that proved wrong) about NVDA valuation, the professor said that either he has “no idea what I’m talking about” or it’s the market that just does not understand.
Aswath Damodoran at the time said that while Nvidia was in the “driving seat” of the AI bandwagon, its path to profits won’t be as easy as the market assumes.
Recently, Oppenheimer’s Rick Schafer joined the NVIDIA Corp (NASDAQ:NVDA) chorus, raising the chipmaker’s price target to $150 from $110 following the 10-1 stock split.
NVIDIA Corp (NASDAQ:NVDA) is one of the stocks accounting for a huge chunk of the total market returns, thanks to its AI-fueled rally that seems to have no end in sight. NVIDIA Corp (NASDAQ:NVDA) shares have gained about 206% over the past one year.
Recently, Barclays Tom O’Malley gave bullish comments on the stock, with a $145 price target and an Overweight rating. The analyst pointed to a potential $25 billion opportunity from countries building up their AI capabilities. O’Malley expects NVIDIA Corp’s (NASDAQ:NVDA) earnings at $3.62 per share in fiscal 2026, while Wall Street analysts on average have a $3.55 per share estimate for NVIDIA Corp (NASDAQ:NVDA) earnings for 2026.
NVIDIA Corp’s (NASDAQ:NVDA) latest product announcements and its plans revealed at the Computex 2024 show that NVIDIA Corp (NASDAQ:NVDA) has much more in its arsenal to power its growth engine. Analysts like NVIDIA Corp’s (NASDAQ:NVDA) shift to new AI architecture known as Rubin (R100) and think its powerful H100 and Blackwell chips easily beat competitors.
NVIDIA Corp (NASDAQ:NVDA) will start shipping H200 in the second half of this year. At its GTC conference NVIDIA Corp (NASDAQ:NVDA) revealed three accelerators – B200, GB200 and GB200 NVL72. All of these products provide growth catalysts for NVIDIA Corp (NASDAQ:NVDA) shares and justify its P/E multiple of 71, given NVIDIA Corp’s (NASDAQ:NVDA) growth expectation of over 100% this year and 32% next year. Based on 2026 EPS estimate set by Wall Street, NVIDIA Corp (NASDAQ:NVDA) is trading at a forward P/E multiple of 35.74, which makes the stock’s valuation attractive given the growth catalysts it has.
Alger Focus Equity Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming. PCs, data centers, virtual reality and high- performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. Simply put, Nvidia’s computational power is a critical enabler of Al and therefore critical to Al adoption, in our view. During the quarter, the company reported solid fiscal fourth quarter results above analyst expectations, driven by strong demand from data centers. Further, large cloud service providers contributed over 50% of revenue and inference tasks-using trained Al models on new data-accounted for over 40% of data center revenue. Management also raised their fiscal first quarter guidance noting that demand is estimated to outstrip supply over the next year. We continue to believe the company is well positioned to potentially benefit from the growing Al data center workloads, which are driving demand for the increased interconnections and fully accelerated software stacks, thereby enabling leading application performance and fast result times.”
