We recently compiled a list of the 8 Most Profitable Blue Chip Stocks to Invest In. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other profitable blue chip stocks.
The September inflation report came in hotter than expected and showed that it remains sticky. Headline inflation rose by 2.4%, slightly above the anticipated 2.3%, and down from 2.5% in August. Month-over-month, CPI increased by 0.2%, exceeding the forecast of 0.1%.
Core inflation, excluding food and energy, also came in higher than expected at 3.3%, compared to the anticipated 3.2%, marking a slight increase from August. On a monthly basis, core CPI rose by 0.3%, which matched August’s figures but was above expectations of 0.2%.
Following the report, the market is expecting a 25 basis points rate cut to no rate cuts in the upcoming Fed meeting. According to the CME FedWatch tool, 79.9% of interest rate traders expect the rate cuts to be at 450-475 bps at the coming Fed meeting while 20.1% expect the rate cut to stay the same. At the beginning of the month, 32.1% expected a 50 bps rate cut, while 67.9% anticipated a 25 bps cut.
Understanding Inflation Trends and Federal Reserve Strategy
Despite the sticky inflation, IBM’s vice chair, Gary Cohn believes that the Fed will cut rates by 100 bps this year. In an interview at CNBC’s ‘Money Movers’, he suggested that the U.S. is experiencing what a soft landing looks like, with inflation decreasing but not steadily. He indicated that reaching the Fed’s 2% target will be challenging, as inflation rates are likely to fluctuate around this level.
Cohn noted that for the first time in nearly two decades, the Fed is balancing both sides of its dual mandate, employment, and price stability, after focusing primarily on one at a time. He believes the Fed is making the right decisions and is currently in a delicate position as it missed meeting opportunities this year.
Cohn expects that the Fed will implement a total of 100 basis points in rate cuts this year, likely consisting of 25 basis point reductions over the next couple of months. When asked about inflation targets, he expressed a preference for slightly exceeding the target inflation rate, suggesting that a rate of around 2.2% would be more acceptable in a growing economy than undershooting the target.
Cohn also highlighted concerns about geopolitical risks and said that global tensions could lead to inflationary pressures by disrupting supply chains and increasing shipping costs.
Our Methodology
For this article, we use stock screeners to identify nearly 30 stocks above $100 billion market cap and $10 billion TTM net income. Next, we narrowed our list to 8 stocks that had a 5-year net income compound annual growth rate of above 10% and were most widely held by institutional investors. The most profitable blue chip stocks are listed in ascending order of the hedge fund sentiment, which was taken from Insider Monkey’s Q2 database of 912 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)
Market Cap: $3.254 Trillion
5-Year Net Income CAGR: 80.81%
TTM Net Income: $53.009 billion
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) focuses on graphics, computing, and networking solutions. It gained prominence with its breakthrough graphics processing units (GPUs), known for their ability to handle multiple tasks at once. While initially a significant player in the gaming industry, the company has since expanded into professional visualization, data centers, and automotive sectors. It is one of the most profitable blue chip stock.
It is one of the best stocks to buy and hold for the next decade. Its AI networking platform, Spectrum X, is projected to generate billions in revenue within a year. The company recently secured a deal with Salesforce, improving AI and data services for businesses. Additionally, the company launched Aerial, an AI tool designed to optimize wireless networks for next-gen technologies like 5G and autonomous systems.
NVIDIA (NASDAQ:NVDA) will announce its earnings in November and expects $32.5 billion in revenue for the fiscal third quarter of 2025, driven by its Hopper architecture and Blackwell chips. The company’s CEO Jensen Huang told CNBC that demand for the company’s upcoming AI chip is “insane” with companies like OpenAI, Microsoft, and Meta eager to obtain it.
On October 10, The Fly reported that after a three-day roadshow with the CEO and CFO of the company, Morgan Stanley revealed that Nvidia’s (NASDAQ:NVDA) Blackwell NVL36/72 systems are in high demand and are sold out for the next year. The firm highlighted the long-term potential of accelerated computing and noted that the AI investment cycle is still in its early stages.
Morgan Stanley maintained its Overweight rating on the company and set a $150 price target as the firm referenced strong market conditions and continued momentum for the company.
Ithaka Group’s 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.”
Overall NVDA ranks 6th on our list of the most profitable blue chip stocks 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.