We recently published a list of Top 10 Favorite AI Stocks of Brad Gerstner. Since NVIDIA Corporation (NASDAQ:NVDA) ranks 3rd on the list, it deserves a deeper look.
Brad Gerstner, the founder of Altimeter Capital, has been a major believer in AI and tech stocks in general. Recently, the 53-year-old hedge fund manager shared some interesting data points highlighting the importance of tech stocks during an interview with Scott Galloway’s YouTube channel.
“Since 2014 technology earnings have compounded at 16% and technology stocks have compounded at 18%. Non-tech earnings have compounded at about 4% and stocks at about 6%. So if you look at the long run of technology since 2005 it’s gone from 5% of global GDP to 15% of global GDP,” Gerstner said.
Gerstner, whose firm manages about $10 billion in assets, emphasized during the interview that the risk of not investing in AI is higher than the risk of investing. He was addressing the market concerns about ROI on AI spending.
“As a professional investor, we’re just trying to determine what level of asymmetry what level of enthusiasm or exuberance is baked into these stocks and what are we seeing day to day in terms of usage and revenues out of the consumer,” he said.
For this article we scanned Altimeter Capital’s Q2 portfolio and discussed its biggest AI stock picks. 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).
Brad Gerstner of Altimeter Capital
NVIDIA Corp (NASDAQ:NVDA)
Brad Gerstner’s Stake: $956,299,667
Brad Gerstner is extremely bullish on Nvidia. In September, while talking to CNBC, the investor said that Nvidia is the “most important” company and indicated that he was not worried about the reports of Blackwell delays.
“Nvidia is not just in the business of generative AI. What Jensen has reminded us that we are going to have to replace the trillion dollars of CPU-driven data centers,” the investor said.
He also addressed the question of ROI on AI spending.
“So I think this red herring about ROI here is one that Wall Street spends a lot of time thinking about but when you look in the board rooms of all the hyper scalers of the big enterprises they are all leaning into investing.”
Nvidia’s declines after the latest quarterly 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.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”
Overall, NVIDIA Corporation (NASDAQ:NVDA) ranks 3rd on Insider Monkey’s list titled Top 10 Favorite AI Stocks of Brad Gerstner. 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.
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Disclosure: None. This article is originally published at Insider Monkey.
