We recently published a list of Analysts are Recommending These 10 AI Stocks. Since NVIDIA Corp (NASDAQ:NVDA) ranks 5th on the list, it deserves a deeper look.
The past several months of market activity and tech innovation has proved that the AI trends that started with the launch of ChatGPT are here to stay and all of this was not something that’d fizzle out after making headlines for some time. Companies are investing billions in AI and they expect to see the results of their investments in the coming months and years. Analysts at UBS said in a report earlier this year that if the launch of ChatGPT was the “iPhone moment” for the AI industry, apps like Copilot signify the “App Store moment.”
UBS also increased its revenue estimates for the AI industry in the report by 40%. The firm said at the time that it now expects revenue in the AI industry to increase from $28 billion in 2022 to $420 billion in 2027. This would represent a CAGR of over 70%.
UBS justified its growth projections by drawing an analogy from the past growth cycles of mainframes, smartphones and PCs.
“Annual shipments for mainframes were only about 1mn units until the 1980s, when they ballooned to around 10mn as microcomputers became mainstream computing devices. This was followed by a sharp increase during the PC era, when annual PC shipments shot up to more than 100mn units, with PC shipments eventually reaching an annual run-rate of nearly 300mn. Smart devices, which include smartphones and tablet PCs, crossed 1bn shipments during the mid2010s. Currently, annual shipments are close to 1.5bn units. With AI, we expect this 10x growth trend to continue, with annual AI chatbots and applications potentially crossing 10bn units.”
For this article we took a look at the latest analyst rating actions around AI stocks and picked the 10 most important AI companies that recently received positive comments or ratings from notable Wall Street analysts. With each stock we have mentioned the number of hedge fund investors. 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)
Number of Hedge Fund Investors: 179
Oppenheimer Asset Management recently gave a Buy rating to Nvidia (NASDAQ:NVDA).
“Key positives for NVDA remain the stock’s bullish trend, high-momentum score, and portfolio tailwinds from a relatively strong Technology sector. In terms of trading, NVDA has inflected positively above the bullish slope of its 200-day average indicating a resumption of the stock’s uptrend, in our view,” the firm said.
However, Aswath Damodaran, NYU Stern School of Business Professor of Finance, reiterated his NVIDIA Corp (NASDAQ:NVDA) thesis on a latest program on CNBC, calling the stock overvalued.
“NVIDIA Corp (NASDAQ:NVDA) is an amazing company, great growth, amazing cash flow, superb margins, but you are paying a premium price even given all of those pluses,” Damodaran said.
Asked what’d be a better buy than NVDA, Damodaran said AMZN is a better stock.
“Given the earnings and their cash flows if I had to buy a stock now and you forced me to a buy a big tech, I’d rather own Amazon I’d buy Amazon than buy Nvidia right now,” Damodaran added.
Aoris International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks 5th on Insider Monkey’s list titled Analysts are Recommending These 10 AI Stocks. While we acknowledge the potential of NVIDIA Corp (NASDAQ:NVDA), our conviction lies in the belief that 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 NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
