We recently compiled a list of the 12 Best Technology Stocks to Invest In for the Long Term. In this article, we are going to take a look at where NVIDIA Corp. (NASDAQ:NVDA) stands against the other technology stocks.
On January 1, King Lip, BakerAvenue Wealth Management’s chief strategist and partner, joined CNBC’s ‘Closing Bell’ to discuss market outlooks as we enter 2025. His focus was on the impressive performance of tech stocks in 2024, with expectations for a second consecutive year of double-digit gains. Lip was against the prevailing sentiment among investors that big tech has peaked and that funds should rotate into smaller stocks or other themes. He argued that the recent weakness in the tech sector is largely due to technical rebalancing rather than a fundamental downturn. He emphasized that cash is likely to flow back into leading tech stocks, as they are projected to deliver the highest earnings growth in 2025, with an anticipated earnings increase of over 20%.
Discussing high valuations in the tech sector, particularly for large-cap stocks trading at forward earnings multiples between 32 and 35 times, Lip countered that many valuations remain within one standard deviation of their historical norms over the past decade. He pointed out that the MAG7 have consistently provided strong returns and are well-positioned for future growth. Lip identified Broadcom as a top stock, praising its management under Hock Tan and its unique role in the market as a provider of custom AI chips. He noted that the company operates at a lower earnings multiple while benefiting from substantial growth.
Lip also discussed Palantir, which has garnered attention for its profitability and positive cash flow since becoming profitable two years ago; despite its high valuation exceeding 50 times revenue, he believes it is well-positioned to benefit from government spending cuts and AI initiatives. While acknowledging concerns about insider selling and high valuations for the company, Lip remains optimistic about its future potential, suggesting it could be more appealing if it drops to the mid-$60 range.
Lip is bullish on tech stocks in 2025 that will be driven by strong earnings growth and ongoing investments in AI infrastructure. The NASDAQ 100 index has performed remarkably well, achieving a return of 27% in 2024 following a staggering 53.8% return in 2023. This reflects a broader trend where major tech companies have outperformed traditional indices significantly, and with that being acknowledged, we’re here with a list of the 12 best technology stocks to invest in for the long term.
Methodology
To identify the best long-term tech stocks according to media, we sifted through financial media reports and watched Wall Street analysts’ appearances on the news. We compiled a preliminary list of 25 stocks first and then selected 12 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 Holders: 193
NVIDIA Corp. (NASDAQ:NVDA) is a global leader in GPU manufacturing and is currently powering the AI revolution. Initially known for gaming, its GPUs now power data centers, robotics, and autonomous vehicles.
The Blackwell architecture, led by the flagship GB200 GPU, represents a significant technological advancement for the company. Strong demand for Blackwell and Hopper platforms has fueled data center growth, with H200 GPU sales reaching double-digit billions. In Q3 2024, it achieved record revenue of $35.1 billion, a 94% year-over-year increase. The data center segment surged 112% to $30.8 billion.
Its GPU revenue surged 67% annually over the past 3 years. While concerns exist about AI spending fluctuations by Big Tech, the rapid advancement of AI models necessitates increasing computing power. For instance, Meta’s Llama model required a 10x increase in computing power between versions 3 and 4. NVIDIA Corp. (NASDAQ:NVDA), with a 90% market share, is the primary supplier of this computing power. Its strong market position, innovative technology, and impressive financial performance position it as a highly promising stock.
Manole Capital Management highlighted that NVIDIA Corporation (NASDAQ:NVDA) more than tripled in value over the past year, driven by strong AI-related demand and continued revenue growth that exceeds market expectations. It stated the following in its Q3 2024 investor letter:
“As of this publication, Nvidia is up roughly 150% year-to-date. NVIDIA Corporation (NASDAQ:NVDA) was the largest gainer in the S&P 500 last year and has more than tripled in value over the last year. It hit an eye-opening market capitalization of $3 trillion in June, less than four months after it eclipsed the $2 trillion mark. Enthusiasm for everything AI-related, especially for the primary chip maker whose products are essential to powering AI technology, continues to fuel the market. Last quarter, and for the fifth consecutive quarter, Nvidia reported sales and profits that blew past Wall Street expectations. The stock rose +37% in the second quarter alone.”
Overall NVDA ranks 5th on our list of the best technology stocks to invest in for the long term. As we acknowledge the growth potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
