1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 180
Jim Cramer has been bullish on NVIDIA Corp (NASDAQ:NVDA) for the past several months. His charitable trust owns the stock. This week, Cramer reiterated his bullish take on NVIDIA Corp (NASDAQ:NVDA) and said NVIDIA Corp (NASDAQ:NVDA) has become a “battleground stock.” Cramer said NVIDIA Corp (NASDAQ:NVDA) evolved from a gaming chips company and it now dominates the artificial intelligence industry.
Cramer also said that NVIDIA Corp’s (NASDAQ:NVDA) rapid rise is causing unease in some circles amid valuation concerns. Cramer shrugged off such concerns and said NVIDIA Corp (NASDAQ:NVDA) is a “keeper.”
In a separate program this week, Cramer quipped:
“Don’t yawn and mock me when I say buy Nvidia.”
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its fourth quarter 2023 investor letter:
“Apple and NVIDIA Corporation (NASDAQ:NVDA) alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. NVIDIA shares rocketed higher by well over 200% in 2023 although they slightly underperformed our Portfolio and the Russell 1000 Growth in the fourth quarter. Generative AI has been a huge boon for NVIDIA as the use of LLMs like ChatGPT and others requires tremendous processing power that, today, is mostly provided by NVIDIA’s GPUs. All large cloud service providers, AI factories, and many large consumer internet companies are laying the foundation for generative AI by deploying NVIDIA GPUs and other parallel processing chips to be able to do large scale generative AI either for internal use (i.e., Meta) or as a service for others (i.e., AI factories) or both (cloud service providers such as Amazon, Microsoft, and Google).
Given many of NVIDIA’s customers or its end customers are still very much in the experimentation phase with generative AI, it is unclear how sustainable the current demand for GPUs truly is. At the same time, it is known that NVIDIA has historically been highly cyclical. By the end of 2024, we believe NVIDIA will already account for roughly half the market for datacenter chips, servers, and networking equipment, which is unprecedented. Even though the valuation at 25x forward earnings doesn’t look very demanding at first glance, it assumes NVIDIA will own virtually the entire datacenter chip market in just the next few years and will sustain year-on-year growth despite being a cyclical business that is currently experiencing much higher new peaks.
We believe NVIDIA is a highly advantaged business, but we also believe the long-term growth outcomes are currently too variable, and the expectations built into the company’s $1.2 trillion valuation as of this writing assume the most optimistic of those scenarios.”
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