We recently compiled a list of the 10 Best Momentum Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other momentum stocks.
In the fast-paced world of investing, momentum is a force that can propel portfolios to new heights—or leave them vulnerable to abrupt reversals. Momentum investing, a strategy centered on capitalizing on upward-trending stocks, has gained renewed attention as markets navigate economic uncertainty, technological disruption, and shifting consumer behaviors. For investors seeking to harness this strategy, the choices of hedge funds—often regarded as the “smart money” on Wall Street—offer a compelling roadmap. These institutions deploy vast resources, cutting-edge analytics, and seasoned expertise to identify stocks with the potential to sustain momentum.
The Allure of Momentum Investing:
Momentum investing is based on the idea that stocks with strong recent performance are likely to keep rising. This momentum is driven by factors such as positive earnings surprises, favorable sector trends, or shifts in the economy. Unlike value investing, which focuses on undervalued stocks, momentum investing capitalizes on market psychology, riding waves of optimism and institutional buying.
Why Hedge Funds Matter:
Hedge funds manage billions in assets and employ teams of analysts, quantitative models, and proprietary data to stay ahead of trends. Their stock picks often reflect deep conviction in a company’s fundamentals, competitive edge, or alignment with transformative themes like artificial intelligence (AI), renewable energy, or healthcare innovation. When multiple hedge funds converge on a stock, it signals collective confidence in its momentum potential. Moreover, their filings—such as quarterly 13F disclosures—provide a window into their strategies, offering retail investors actionable insights. While past performance is no guarantee, tracking these moves may help identify high-conviction opportunities poised for sustained growth.
Growth of Momentum Stocks:
Momentum stocks have experienced significant growth recently, driven by advancements in artificial intelligence, healthcare, and digital transformation. In 2024, momentum investing emerged as one of the top-performing strategies, with high-momentum stocks outperforming low-momentum ones by 28% year-over-year as of December 11, 2024, as reported by Morgan Stanley.
Hedge funds have been instrumental in this trend, significantly increasing their investments in momentum-driven sectors. For instance, hedge funds boosted their exposure to financial firms by 50%, totaling $340 billion, contributing to a 33% surge in the NASDAQ Bank Index, which outpaced both the broader market and the tech-heavy Nasdaq.
The power of momentum investing is particularly evident in sectors like technology, with companies leading the charge in artificial intelligence and cloud computing. For instance, during the first three quarters of 2024, AI-related startups raised $6 billion, accounting for 14.6% of total climate tech investment, according to a report by PwC. With this in mind, let’s take a look at some of the best momentum stocks.
Our Methodology
For this list, we analyzed the holdings of the iShares MSCI USA Momentum Factor ETF (MTUM), which targets U.S. stocks exhibiting strong momentum based on factors like price and earnings growth. We then cross-referenced these holdings with Insider Monkey’s Q3 2024 hedge fund database to identify which companies in the ETF had the highest number of hedge fund investors. By ranking these companies based on the number of hedge funds holding positions, we compiled a list of momentum stocks that show strong performance trends and are favored by most 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: 193
NVIDIA Corporation (NASDAQ:NVDA) is a global leader in artificial intelligence, graphics processing units (GPUs), and high-performance computing. Renowned for revolutionizing gaming, data centers, and AI technologies, the company continues to drive innovation across industries, from autonomous vehicles to cloud computing.
Over the last 5 years, NVIDIA Corporation (NASDAQ:NVDA) has provided a total return of a whopping 1,779.83% compared to a meager 80.16% return from the broader market, which makes NVDA one of the best momentum stocks. The company reported impressive financial results for Q3 FY2025, with record quarterly revenue of $35.1 billion, reflecting a 17% increase from Q2 and a 94% surge from the previous year. Data Center revenue was particularly strong, reaching $30.8 billion, up 17% from Q2 and up 112% year-over-year. The company posted GAAP earnings per share (EPS) of $0.78, up 16% from the previous quarter and up 111% from the same period last year.
NVIDIA Corporation (NASDAQ:NVDA) has launched the GeForce RTX 50 series, a leap over the 40 series, featuring enhanced AI capabilities and significant performance improvements through DLSS 4. Despite growing competition from emerging companies like DeepSeek, the company remains dominant in the AI hardware market, bolstered by its robust software ecosystem, including CUDA. Additionally, the company is leveraging synthetic data to train AI models and innovate in biomedicine with AI-designed proteins. With these advancements, NVIDIA Corporation (NASDAQ:NVDA) is not only maintaining its leadership in graphics but also positioning itself at the forefront of AI, healthcare, and cloud gaming.
Blayne Curtis of Barclays maintains a “Buy” rating on NVIDIA Corporation (NASDAQ:NVDA), raising the price target from $160 to $175, indicating a potential upside of 29.03%.
Overall NVDA ranks 1st on our list of the best momentum stocks to buy according to hedge funds. While we acknowledge the potential for NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
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Disclosure: None. This article is originally published at Insider Monkey.
