1. NVIDIA Corporation (NASDAQ:NVDA)
Revenue Growth: 122.4%
Number of Hedge Fund Investors In Q3 2024: 193
NVIDIA Corporation (NASDAQ:NVDA) is the world’s leading graphics processing unit (GPU) designer. The firm’s GPUs are dead center of the AI wave and have led to its shares gaining more than 700% since OpenAI publicly released ChatGPT. Consequently, NVIDIA Corporation (NASDAQ:NVDA)’s hypothesis is dependent on several facets of its GPU business. Firstly, the firm has to remain the market leader in performance to ensure that its products are not replaced by rivals like AMD or firms like Amazon designing custom chips. Secondly, not only does NVIDIA Corporation (NASDAQ:NVDA) have to ensure a robust supply chain for its products to avoid shortages, but it also has to ensure that production and development costs are sufficiently low to enable robust margins to eke out profits. Finally, the firm’s hypothesis is also dependent on the continued and growing demand for AI-enabled products and services in the business world.
Polen Capital mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter. Here is what the fund said:
“In a reversal from the past two quarters, NVIDIA Corporation (NASDAQ:NVDA) represented our top relative contributor this quarter, despite the modest underperformance, declining -1.7%. In many ways, NVIDIA was a microcosm of the broader market’s heightened volatility. Beneath the placid surface, the company experienced a 27% drawdown followed by a +31% rally, only to repeat the cycle with a -21% drawdown followed by a subsequent 20% rally to finish the quarter. In our view, the stock’s volatility goes beyond fundamental business drivers, but the company in turn benefitted from increasing capital spending budgets from cloud service providers and large enterprises for generative AI (“GenAI”) infrastructure spending. Simultaneously, the stock endured weakness related to the delayed next-generation Blackwell chip, and an earnings forecast that exceeded expectations, albeit not as much as some investors hoped. While we continue to believe NVIDIA is a highly advantaged business, with significant demand for their chips and servers ahead of the need for that hardware from real-world businesses, we are cautious about its growth sustainability since it lacks recurring revenue.”
NVDA is an aggressive growth stock that hedge funds are diving head first into. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that 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.
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