We recently published a list of 11 Trending AI Stocks On Latest News and Analyst Ratings. Since NVIDIA Corp (NASDAQ:NVDA) ranks 1st on the list, it deserves a deeper look.
Investors remain cautious following a major global selloff that shook the markets last week on recession fears. Analyst warnings around sky-high CapEx of tech companies and lack of visibility over returns are also expected to keep tech valuations in check in the coming weeks.
Last month, Roger McNamee of Elevation Partners, while talking to CNBC, highlighted a report from Goldman Sachs that said returns of AI investments might fail to meet investors’ expectations.
“The amount of capital investment in this sector, which is billions of dollars now, is so large that it’s almost unimaginable that we are going to get a rate of return over the next few years that justifies the amount of investment,” McNamee said.
Talking to Bloomberg, JPMorgan Asset Management’s Aisa Ogoshi said that there is some “adjustment” coming for tech stocks as she expects the AI-centric rally to diversify to other sectors.
“The key is to keep an eye on the earnings trends. It’s easy to panic in these times but really, just sit down and look at the numbers and reassess our positioning.”
Asked whether she plans to reduce exposure to AI stocks in the coming days, the analyst said she’d be more “selective” when it comes to AI plays and will increase the quality of stocks in the portfolio.
For this article, we chose 11 trending AI stocks based on the latest news, earnings 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: 186
BofA said in a latest note that NVIDIA Corp (NASDAQ:NVDA) is one of the tech stocks presenting an attractive buy-the-dip opportunity.
NVIDIA Corp (NASDAQ:NVDA) shares are on the decline amid valuation concerns. However, Morgan Stanley re-added the stock to its top picks list. Analyst Joseph Moore said:
“Visibility will actually increase as demand moves from Hopper to Blackwell, as the constraint will shift back to silicon; H100 lead times are short, but H200 lead times are already long, and Blackwell should be even longer,” the firm said.
However, the latest big tech earnings have raised some concerns on NVIDIA Corp (NASDAQ:NVDA) future growth trajectory. The company’s major customers including Meta Platforms and Alphabet have indicated that they may be overbuilding and overspending on AI chips. NVIDIA Corp (NASDAQ:NVDA) is selling about 2 million of its GPUs on an annual basis based on 2023 data. As demand moderates and competitors up their production, the company won’t be able to sustain its current growth trajectory.
Raymond James analyst Javed Mirza recently said in a report that NVDA has “triggered a mechanical sell signal” based on a moving average convergence/divergence indicator. In a technical analysis report, he stated that the stock is trading below its 50-day moving average and exhibiting early signs of selling pressure. This, according to Mirza, shows there is a looming corrective phase lasting 1-3 months. He added that a sustained break below the 50-day moving average could lead to a decline towards 94.94, representing a further 16.9% drop from current levels.
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to lead both the market and the portfolio, remaining a top performer in the period gaining 36.7%. Nvidia is the market leader in designing and selling Graphics Processing Units (GPU), which has recently benefited from the insatiable demand of artificial intelligence (AI) models. The company currently captures 92% market share of data center GPUs and grew revenue, earnings and free cash flow (“FCF”) an astounding 126%, 392%, and 610%, respectively, over the last year. While we expect competition to increase, we think NVDA can continue to maintain top market share. While many are concerned with backlog times shortening, we think the rollout of the B100, which promises 2.5x better performance for only 25% more cost, later this year will create more shortages. With leading edge technology, an increasing innovation cycle and strong cash generation, the company is well positioned for the increased adoption of artificial intelligence (AI).”
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks 1st on Insider Monkey’s list titled 11 Trending AI Stocks On Latest News and Analyst Ratings. While we acknowledge the potential of NVIDIA Corp (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.