2. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a recent program said that there’s “nothing” wrong with NVIDIA Corp (NASDAQ:NVDA) and the company remains the market leader in the AI chips space. He also told investors when to buy NVIDIA Corp (NASDAQ:NVDA) shares.
“NVIDIA Corp (NASDAQ:NVDA) is not being dethroned by any competitor. Even the companies trying to compete against it are faithful customers who have no choice but to develop alternatives because NVIDIA Corp (NASDAQ:NVDA) can’t supply enough chips to meet demand. I think it’s just profit-taking after a monster run. It has been a monster run, hasn’t it?
On January 6, 2025, NVIDIA Corp (NASDAQ:NVDA) founder and CEO Jensen Huang will present a keynote at CES, the largest tech expo in the world. He has previously used that podium to introduce many innovations that turned NVIDIA Corp (NASDAQ:NVDA) into one of the most valuable companies on Earth.
When will the stock bottom? I always let a stock tell me what to do. NVIDIA Corp (NASDAQ:NVDA) bottoms when the stock rolls over at the open, then hits a level on big volume where it stops before working its way back up to well above where it opened. That, people, is called a crescendo bottom—when everyone of size who wants to get out has done so. No need to jump the gun, but keep in mind that if you don’t own any, you might want to wait until right ahead of the CES.”
Simply beating earnings estimates or announcing new products is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.
Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.
Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.
Manole Capital Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) 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.”
