We recently published a list of Top 10 Trending AI Stocks to Watch. Since NVIDIA Corporation (NASDAQ:NVDA) ranks 2nd on the list, it deserves a deeper look.
Wall Street continues to gain momentum amid the latest earnings season and analysts are wondering whether we are still up for soft landing. Mohamed El-Erian, Allianz chief economic advisor, talked about the possibility of a soft landing vs no landing during a program on CNBC. When asked what would it take for the market to have a no-landing scenario, the analyst said:
“I think we need the productivity enhancers from A.I., from life sciences to come earlier, we need to continue to have positive shocks to our labor force. And if we get those two things, you can get the bigger but not hotter economy which actually would be perfect for almost everything you can think of, from households to companies to financial markets.”
The analyst does not rule out the possibility of a recession, however.
“My probability of a soft landing is 55%, and a recession is 30%. A soft landing is the most likely scenario, but it’s not dominant. Why isn’t it dominant? Because we have weakness in the household sector, particularly on the lower-income side, and the Fed has been unpredictable. Just think, Morgan—at the end of July, the Fed didn’t cut rates because everything seemed fine. By the next meeting in mid-September, it cut 50 basis points. And now it’s talking about cautious cuts. So, the Fed needs to be careful.”
For this article we picked 10 trending AI stocks based on latest news. With each company we have mentioned its hedge fund sentiment. 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).
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Stacy Rasgon, Bernstein senior analyst, while talking about Nvidia in a latest program on CNBC, said:
“People are getting excited about the story again as we approach earnings, year-end, and next year when the new platform with Blackwell starts to ramp up. By all indications—based on supply chain checks and everything else—demand for this product looks off the charts.”
The analyst said Nvidia Corp (NASDAQ:NVDA) was able to work through the Blackwell delays and it did not impact its business. He thinks the stock is “not expensive.”
“It’s much cheaper today than it was before the run started a year and a half ago. The stock has risen significantly, but earnings have increased even more than the stock.”
Nvidia’s declines after the Q2 results were more or less expected amid Blackwell delay reports confirmed by management. However, the delays were mainly due to a change in Blackwell GPU mask. That does not affect the main functional logic or design of the chip, according to analysts. While Blackwell has been delayed for a few months, it does not change the core growth thesis for Nvidia.
Nvidia is set to see huge growth on the back of the data center boom amid the AI wave.
At Nvidia’s GPU Technology Conference in March 2024, CEO Jensen Huang estimated annual spending on data center infrastructure at about $250 billion. Over the next decade, this could total between $1 trillion and $2 trillion, depending on how long this level of investment continues. During the same Q&A session, Bank of America’s Vivek Arya echoed this estimate, suggesting the total addressable market would fall in the $1-2 trillion range, particularly as countries invest in their own AI infrastructure. By the end of the decade, spending could be at the high end of that range.
Of course, Nvidia won’t dominate the entire $2 trillion opportunity, as it faces competition from companies like AMD and internally developed AI accelerators from Google, Amazon, and even Apple. Some analysts believe Nvidia’s data center market share between 2025 to 2029 will be over $950 billion—less than half of the total market—but still enough to make it the leader in the sector.
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.”
Overall, NVIDIA Corporation (NASDAQ:NVDA) ranks 2nd on Insider Monkey’s list titled Top 10 Trending AI Stocks to Watch. While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
