We recently published a list of 9 Buzzing AI Stocks to Watch on Latest News. In this article, we are going to take a look at where Nvidia Corp (NASDAQ:NVDA) stands against other buzzing AI stocks to watch on latest news.
Doug Clinton, Intelligent Alpha founder, talked recently about the issue of scaling in AI on CNBC and said that in the past the improvement of AI models was surging based on the data inputs. However, Clinton referred to the recent reports of AI models hitting a plateau in performance. He believes this issue will be important for AI investors in the coming months and years.
“Just to give the quick 101: Over the last few years, what we’ve seen in AI model development is that the more data you put into these models and the more compute you use to train them, the better the models get—very predictable. However, recent reports from OpenAI and Google show that the latest models they’ve trained haven’t been as good as expected based on scaling laws. This has sparked debate in Silicon Valley. Even Sam Altman tweeted about it last week, saying, “There is no wall,” so maybe it’s not an issue—we’ll see. But I think Jensen really needs to address that question because the 18 to 24-month picture hinges on whether these companies will need to invest in something beyond just compute.”
However, the analyst is bullish on the broader AI market in the long term and believes companies are just getting started in this bull market.
“I think if you take a longer-term view—2 to 4 years—we’re still very confident we’ll be in an AI bull market. That doesn’t mean there won’t be pullbacks here and there, but I think we have a long way to go. Companies are really just starting to adopt AI, and we’ll begin to see those revenues over the next year and beyond.”
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For this article we picked 10 AI stocks trending on latest news and analyst ratings. With each stock we have mentioned the number of hedge fund investors. 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).
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Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Mark Yusko, Morgan Creek Capital Management CEO & CIO, is recommending investors sell Nvidia Corp (NASDAQ:NVDA) shares. Yusko explained his bear thesis on Nvidia Corp (NASDAQ:NVDA) during a program on CNBC:
“I’m old enough to remember that Intel stock went up 20 fold over 10 years because their chip was going to revolutionize AI in 2000 and today that stock is 63% lower than it was 24 years ago. So you don’t stay on top forever and Nvidia came along and invented GPU and now we got TPUs and VPUs and LPUs. So I think innovation will keep rolling but the thing I’m most worried about with Nvidia, their third largest customer is about to get delisted. That’s a big story.”
Asked how Super Micro (SMCI) delisting could impact Nvidia Corp (NASDAQ:NVDA), the analyst said:
“Well if it’s your third largest customer and they actually haven’t, they don’t have the capacity to continue to be your third largest customer, what happens to your revenue growth and profits growth? I, you know, we’ve seen this movie before with Nell and Cisco back in 2020. So I don’t know, that makes me nervous.”
Simply beating earnings estimates is not enough for Nvidia anymore. The stock fell despite reporting better-than-expected numbers for the latest quarter. However, analysts are sensing a growth slowdown. Nvidia’s Q4 revenue guidance missed the buy-side whisper number of $39 billion, and the company expects gross margins to keep shrinking next quarter. For Q4, non-GAAP gross margin is projected at 73.5%, down from 75% in Q3. Nvidia’s biggest customers, cloud hyperscalers — which account for 50% of its revenue — are increasingly developing in-house AI chips and collaborating with competitors like AMD. This raises concerns about Nvidia’s medium-to-long-term growth in demand and margins.
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“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.”
Overall, NVDA ranks 5th on our list of buzzing AI stocks to watch on latest news. While we acknowledge the potential of NVDA, our conviction lies in the belief that under the radar 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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Disclosure: None. This article is originally published at Insider Monkey.
