1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
Jim Cramer in a latest program on CNBC said NVIDIA Corp (NASDAQ:NVDA) numbers from “excellent” and the company has been delivering a steady performance.
“It was a very good quarter. Everyone thought this would be the most eventful quarter of earning season, but it turned out to be a non-event. Why? Because it was terrific, and Jensen Huang gave us terrific numbers. He’s about as steady as the president is Ruel. The company posted solidly better-than-expected sales and earnings, with strong guidance for the quarter driven by the strength of their new high-end chips, the Blackwell chips. Fantastic. Bravo. While we still have to worry about tariffs and export restrictions, I have to tell you, the numbers were excellent.”
Nvidia’s numbers might be excellent, but the market will keep punishing the company for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. Nvidia’s Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. Market does not like when Nvidia fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offer alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU process, set to be produced on its 18A or 14A node.
Baron Fifth Avenue Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company specializing in compute and networking systems for accelerated computing and AI. Shares increased 10.6% for the quarter and were up 170.3% in 2024, on strong quarterly results, with record data center revenue, which surpassed $30 billion, driven by demand for its Hopper GPUs, while Gaming and Automotive also beat expectations. Key investor debates include the continued progress on improving the capability of AI models (e.g. scaling laws – see more in the outlook section below), transition from AI training to inference and the potential impact on competitive dynamics, and the pace of adoption of AI across industries. Despite near-term uncertainties, we maintain conviction in NVIDIA’s leadership in accelerated computing, driven by its ability to innovate and adapt to market shifts. With robust margins, a dominant data center presence, and a growing ecosystem across hardware and software, we believe NVIDIA is well positioned to capitalize on the structural growth in AI and high-performance computing.”
While we acknowledge the potential of NVIDIA Corporation (NASDAQ: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 time frame. 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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