We recently compiled a list of the 7 Best Ethical Companies To Invest In According to Reddit. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other ethical companies to invest in.
Ethical investing involves choosing investments based on ethical principles, such as environmental, religious, or social values. Unlike socially conscious investing, which follows a specific set of guidelines, ethical investing is more individualized. Investors typically avoid being involved in gambling, alcohol, or firearms, and carefully research to make sure their investments align with their values.
Other stocks that are avoided by ethical investors include the shares of companies where employees are mistreated, have high gender parity, or discriminate against employees due to their race, religion, or sexual orientation. Environmentally conscious companies are also a huge part of ethical investing.
Is Ethical Investing the Future?
A 2022 report by Stamford University noted that the younger generation considers ethical investing quite crucial. A 2022 survey of 2,470 individual investors, conducted by Stanford University’s Rock Center for Corporate Governance, found significant differences in Environmental, Social, and Governance (ESG) preferences based on age and wealth. Younger and wealthier investors are more likely to support ESG initiatives, even at the expense of returns, while older and less wealthy investors are generally opposed.
Over recent years, support for ESG proposals has surged, with average support among S&P 500 companies increasing from 18% in 2012 to 35% in 2021, and the number of proposals passed rising from 0 to 28. The survey found that 70% of young investors (18-41 years old) are very concerned about environmental issues, compared to only 35% of older investors (58+ years old). Similarly, 65% of young investors are very concerned about social issues, versus 30% of older investors. When it comes to governance, 64% of younger investors express significant concern, while only 28% of older investors do.
Moreover, 86% of older investors would not give up any or only a trivial amount of returns for carbon emission reductions, while 64% of younger investors would give up moderate or large amounts. Additionally, 91% of older investors are unwilling to sacrifice returns for workplace diversity improvements, compared to 62% of younger investors who are willing to do so.
The survey also found that investor attitudes towards ESG differ across fund companies. Investors in State Street and Invesco funds exhibit nearly twice the concern for environmental issues compared to those in Fidelity funds. A significant percentage of investors in Fidelity (40-45%) and Vanguard funds are unwilling to forfeit returns for ESG, while a smaller percentage in American Funds and BlackRock (25-30%) share this reluctance.
Despite these differences, 83% of investors across all demographics believe that fund managers should consider their views when voting on ESG issues. The results suggest that fund managers might need to allocate votes on a proportional basis to reflect the diverse preferences of their investor base.
Our Methodology
For this article, we scoured through several threads to discover which companies were considered ethical according to the users. We narrowed down the list to 7 stocks that were most widely mentioned and used the hedge fund sentiment of each stock as a tie-breaker. The companies are listed in ascending order of the number of hedge fund holders as of the second quarter of 2024. The hedge fund data was taken from our database of over 900 elite hedge funds.
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).
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is a California-based prominent tech company that is recognized for its groundbreaking advancements in graphics processing units (GPUs) and AI. Originally concentrating on the gaming sector, the company developed sophisticated graphics solutions but has since broadened its range to include high-performance computing, AI hardware, and software.
In its Graphics segment, it provides GeForce GPUs designed for gaming and personal computers, along with the GeForce NOW game streaming service. This segment also includes Quadro/NVIDIA RTX GPUs aimed at enterprise workstations and Omniverse software for creating and managing metaverse environments.
The Compute and Networking segment covers a wide range of solutions, including data center computing platforms and comprehensive networking systems. This segment also features Jetson robotics and various embedded platforms, as well as NVIDIA AI Enterprise, among other offerings. It tops our list of the best ethical companies to invest in.
In the second quarter, 179 hedge funds held positions in NVIDIA (NASDAQ:NVDA) and their stakes amounted to $53.67 billion. As of June 30, Fisher Asset Management is the most dominant shareholder in the company and has a position worth $11.54 billion.
NVIDIA (NASDAQ:NVDA) is making significant strides in addressing environmental concerns within the technology sector, especially in the context of artificial intelligence. According to digital news brand, Stockhead, the company’s advancements in GPUs are evidence of this effort. Its GPUs are highly regarded for their efficiency compared to traditional central processing units (CPUs), particularly in handling AI workloads.
According to CEO Jensen Huang, the GPUs are up to 20 times more energy-efficient for specific AI and high-performance computing tasks than CPUs. This efficiency is critical for reducing energy consumption and carbon emissions in data centers, which are becoming increasingly important as the demand for AI technology grows.
In addition to their efficiency, the company’s RAPIDS Accelerator is an important innovation that further enhances environmental sustainability. By optimizing the processing capabilities of its GPUs, the RAPIDS Accelerator can potentially cut a data center’s carbon footprint by up to 80%.
Major companies such as Adobe and AT&T have tested this technology and reported faster processing speeds, reduced costs, and improvements in AI model training. Furthermore, the Perlmutter supercomputer at the National Energy Research Scientific Computing Center in Berkeley demonstrated a five-fold increase in energy efficiency by utilizing Nvidia’s A100 Tensor Core GPUs.
NVIDIA (NASDAQ:NVDA) has also made significant advancements in AI ethics as evidenced by initiatives led by Nikki Pope, the company’s first-ever head of AI and legal ethics. Her team has introduced a beta-testing process involving community resource groups from diverse backgrounds to help identify and address unintended biases in AI products. This approach ensures that the company’s AI models are not only more efficient but also more equitable and transparent.
The “Model Card++” project, which enhances the transparency of AI models by providing detailed information on privacy, safety, and bias, has been well-received and represents its commitment to ethical AI development. The company’s ability to deliver powerful, efficient solutions and its proactive approach to addressing AI ethics make it a compelling player in the tech industry.
Furthermore, NVIDIA (NASDAQ:NVDA) also seems to have a healthy work culture as the company promotes a collaborative and non-hierarchical work environment, where teams are formed based on project needs and innovation is encouraged, even at the risk of failure. It is dedicated to providing excellent pay, benefits, and a supportive work culture, allowing employees to do meaningful work.
The company offers several benefits to support employees and their families through various life events. These include resources for building a family, such as adoption, fertility, and surrogacy support, as well as assistance for developmental disabilities through RethinkCare. The company also provides college preparation resources through Collegewise, and offers support for life changes like marriage, divorce, having a child, moving, buying a home, and becoming eligible for Medicare. The company extends benefits for mourning, gender affirmation, and LGBTQ+ support, and offers guidance for those leaving the company.
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 NVDA ranks 1st on our list of best ethical companies to invest in. While we acknowledge the potential of NVDA as an investment, 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: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
