1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Jim Cramer highlights NVIDIA Corporation (NASDAQ:NVDA) as a standout despite recent negativity surrounding its performance. After a strong earnings report, NVIDIA Corporation (NASDAQ:NVDA) fell from $126 to $102, with many investors misunderstanding the company’s potential and even mispronouncing its name. This week, those who sold in panic might be regretting their decision.
Cramer notes that demand for NVIDIA Corporation (NASDAQ:NVDA)’s new Blackwell supercomputer chipset is so high that CEO Jensen Huang mentioned customers are becoming “emotional about allocation,” indicating strong demand rather than a shortage. Additionally, NVIDIA Corporation (NASDAQ:NVDA)’s use of accelerated computing with its advanced GPUs offers significant energy efficiency and cost advantages compared to traditional CPUs from companies like Intel Corporation (NASDAQ:INTC).
“Naturally, saving the best for last: NVIDIA Corporation (NASDAQ:NVDA). We got a huge quarter from them last month, yet all we heard was how disappointing the numbers were. Yeah, cancel the watch parties for NVIDIA Corporation (NASDAQ:NVDA), no more tailgating. The stock was trading around $126 before the quarter and fell to $102 at its lows last week. The world had given up on it, but they didn’t even know why or how. They didn’t even know what NVIDIA Corporation (NASDAQ:NVDA) does. They certainly can’t pronounce it—they say it like Nivea cream.
This week, those who panicked and dumped the stock. Well, guess what? I think they’re trying to remember why the heck they did something so foolish. We’ve now learned that demand is so strong for Blackwell, the new supercomputer chipset that is shipping in volume this year, that CEO Jensen Huang says customers are getting “emotional about allocation.” That sure doesn’t sound like NVIDIA Corporation (NASDAQ:NVDA)’s got a demand problem, as many critics speculated at the time.
It sounds more like they’ve got “too much” demand. Plus, Jensen talked about the other huge part of the business: accelerated computing. No one talks about that, which uses NVIDIA Corporation (NASDAQ:NVDA)’s ultra-fast graphics processing units (GPUs) to handle anything intensive, rather than the CPU, which is usually made by Intel. This approach is much more energy-efficient and faster, not to mention cheaper when it comes to energy consumption, which has become the key variable in the total operational cost of semiconductors. Next thing you know, the stock’s at $119. Can it get back to where it was before the so-called horrendous quarter? Can it hit 127 again? I don’t know. All I can say is: why not?
Look, it’s right to be skeptical when you’re investing. It’s right to be cautious. But the bottom line is, not every executive deserves the same level of skepticism or scorn. Some CEOs have earned your trust.”
NVIDIA Corporation (NASDAQ:NVDA) is a top investment pick due to its strong position in the AI sector, impressive financial performance, and growing presence in data centers. NVIDIA Corporation (NASDAQ:NVDA) leads in AI hardware with its powerful GPUs, like the A100 and H100, which are crucial for AI model training and inference. This leadership has significantly boosted NVIDIA Corporation (NASDAQ:NVDA)’s revenue.
In Q2 FY2024, NVIDIA Corporation (NASDAQ:NVDA) exceeded expectations with revenue reaching $26 billion, a 206% increase from the previous year, and an EPS of $4.02. The demand for NVIDIA Corporation (NASDAQ:NVDA)’s AI chips remains high, with growth expected to continue in data centers and AI applications through 2025 and beyond. NVIDIA Corporation (NASDAQ:NVDA)’s strategy to diversify its data center revenue across different sectors and regions strengthens its growth prospects.
While high valuation and potential fluctuations in AI demand are risks, Wall Street’s strong buy ratings and price targets up to $1,200 reflect NVIDIA Corporation (NASDAQ:NVDA)’s potential for significant returns, making it an attractive investment in AI and accelerated computing.
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.”
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 timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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