We recently compiled a list of the 10 Most Profitable NASDAQ Stocks To Invest In. In this article, we are going to take a look at where NVIDIA Corp. (NASDAQ:NVDA) stands against the other profitable NASDAQ stocks.

Is the Market Sentiment Still Bullish?

Recent analysis indicates that an anticipated tech rally may be delayed until year-end, despite the S&P 500 achieving a remarkable 20% increase year-to-date. As September closed, the index rose by 1.6%, defying its historical volatility and showcasing market resilience. Positive macroeconomic indicators are emerging, with upward revisions to Q3 growth estimates and low jobless claims, suggesting a stable economic foundation.

However, concerns about sustaining market momentum without new catalysts persist. Historically, stock prices and price-to-earnings multiples rise together unless disrupted by negative events. As the market approaches traditionally strong months following elections, expectations for a potential year-end rally are building. Despite elevated volatility and geopolitical tensions, investor caution remains. The NASDAQ 100 has surged significantly over the past two years, but this performance does not yet indicate speculative excess. In the last days of September, DataTrek Research co-founder, Nick Colas, joined CNBC to discuss the trading day and highlighted his outlook on the NASDAQ during the conversation. We covered his views in our article on the 10 Best Performing NASDAQ Stocks in 2024. Here’s an excerpt from it:

“…Over the past two years, the NASDAQ 100 has surged approximately 67%, marking a significant recovery since its lows in October two years ago. This performance is substantially above the historical average return of around 25%. Colas emphasized that while such returns are impressive, they do not yet indicate speculative excess; historically, a doubling of the NASDAQ over two years would signal potential trouble for investors.

Looking back further, Colas noted that since peaking before the bear market in November 2021, the NASDAQ 100 has only risen about 20% over three years. This suggests that there may still be room for growth compared to prior bubbles when returns were much more pronounced within shorter time frames.”

In a recent discussion on October 9,  Jason Snipe, Odyssey Capital Advisors principal, joined CNBC’s ‘Closing Bell’ to discuss the tech sector’s mega-cap momentum, particularly in light of recent mega-cap stock downgrades and significant investor outflows. Despite these challenges, Jason Snipe noted that the tech sector is having a positive day, attributing this to a combination of improved earnings estimates across various sectors and substantial investments in AI-related capital expenditures. He emphasized that ~40% of operating cash flow is being allocated to AI, raising questions about when these investments will start to yield returns. This focus on AI has contributed to some recent downgrades but also suggests continued upside potential for select names within the sector.

Snipe further defended the tech space by highlighting the profit margins of mega-cap stocks, which average over 23%, compared to just over 8.5% for other sectors. This discrepancy indicates a strong reason for ongoing capital inflows into tech and software companies that demonstrate earnings strength. He acknowledged that while there may be some consolidation and a slowdown in growth, he believes that investors’ muscle memory will eventually lead to a resurgence in these stocks.

When discussing NVIDIA’s recent performance, Snipe pointed to comments made by the CEO regarding the endless demand for their Blackwell chip as a significant catalyst for the stock’s movement. He expressed confidence that it would exceed earnings expectations when they report later in the earnings season. However, Snipe also addressed concerns regarding Amazon, which has seen its stock decline for 8 of the last 9 days. He noted that its retail business appears to be struggling, with retail making up 62% of its operations. Despite this, he highlighted AWS as a bright spot, which reported a 19% year-over-year acceleration. He suggested that competition from other retailers could pressure its retail margins but remained optimistic about the company’s diverse revenue streams, including advertising and subscription services.

Snipe’s analysis underscores the complexities facing the tech sector amid market volatility and evolving economic conditions. While challenges persist, particularly with mega-cap stocks experiencing downgrades, there are also significant opportunities driven by innovation and strong profit margins that could support continued growth in this space. As expert sentiments shift regarding MAG7 and other big tech stocks, other profitable tech companies are maintaining their positive momentum in the market.

Methodology

We sifted through Finviz to compile an initial list of the top NASDAQ stocks. From that list, we narrowed our choices to 20 companies with positive TTM net income and 5-year net income compound annual growth rates. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.

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).

NVIDIA Corp. (NASDAQ:NVDA)

TTM Net Income: $53 billion

5-Year Net Income CAGR: 80.81%

Number of Hedge Fund Holders: 179  

NVIDIA Corp. (NASDAQ:NVDA) specializes in graphics processing units (GPUs), which are applied in gaming, artificial intelligence, data centers, and professional visualization. It’s known for its innovative technology and its role in driving advancements in fields like machine learning and deep learning.

Impax Asset Management, a $50 billion asset manager, has increased its stake in NVIDIA Corp. (NASDAQ:NVDA) after underestimating the company’s potential. The firm believes the company is currently undervalued, considering the growing demand for its chips driven by the AI boom. Impax also sees the focus on energy efficiency as a positive factor from a climate perspective.

The company achieved significant growth in FQ2 2025, with revenue surging 122.40% from a year-ago period. The data center segment was the primary driver of this growth, with revenue increasing 54% due to strong demand for NVIDIA Hopper, GPU computing, and networking platforms. Cloud service providers accounted for a significant portion of data center revenue, contributing to the company’s impressive financial performance. Partnerships with healthcare institutions and increasing demand for AI-powered diagnostic solutions also played a role.

Its technology is used by various companies, including NetApp, which recently unveiled a new AI-powered data solution in late September. Elon Musk’s AI startup, xAI, is also utilizing NVIDIA’s H100 GPUs for its Colossal AI training system. Its focus on AI monetization and sustainability initiatives positions the company for long-term success. While the stock may seem expensive, its valuation is reasonable considering its growth prospects.

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 NVDA ranks 1st on our list of the most profitable NASDAQ stocks to invest in. While we acknowledge the 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: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.