We recently published a list of Stocks On the Rise: 8 Best Stocks to Invest in Now. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against other best rising stocks to invest In now.
The market experts believe that Q3 2024 saw stocks experience increased volatility, witnessing rapid declines and then rebounding. As per the US Bank, a significant Q3 2024 trend is the rotation away from the tech sectors. All the investors continue to ask the same question: Will the rally in mega-cap stocks continue? JP Morgan believes that their outperformance has been noteworthy for quite some time. The investment firm stated that, from a research perspective, the valuations of the biggest stocks appear historically expensive, not just in the US but throughout the developed markets. Therefore, the investment firm’s expected return signals now favour the smaller market cap cohorts.
That being said, fundamentals for mega-cap stocks remain outstanding. Such giants have much higher profitability, lower debt, and improved earnings momentum. The bank believes that for investors who are worried about a slowdown, pivoting to mid/small caps remains difficult. On the other hand, investors seeing AI enthusiasm entering the speculative phase will find it easier to liquidate the winners. Therefore, the firm believes that the case for building mid/small cap exposure remains reasonable but not compelling.
Goldman Sachs increased its year-end target for the S&P 500 and expects more gains for the benchmark in 2025. These gains stem from the stocks, which continue to increase on the back of strong economic growth, lower Federal Reserve interest rates, and expansion of corporate earnings. The US stocks are expected to be aided by numerous tailwinds in the final months of the year, after the Fed’s pivot to rate cuts and the new fiscal stimulus from China. Both these measures improved the risk sentiments. Market experts believe that stocks should see support from the Q3 earnings season and expansion of corporate profits in the final 3 months as the economy continues to surpass expectations.
LSEG data demonstrates that collective S&P 500 earnings for Q3 2024 should grow 5% as compared to the previous year to ~$5.11 billion. This reflects a decline from the earlier projections of a $5.19 billion tally. Nonetheless, it still indicates strong momentum for this year and next, with Q4 profits anticipated to increase by ~12.5%.
Recently, Goldman trimmed its 2024 earnings growth forecast to 8.2% from 8.4%. However, the investment firm expects that earnings momentum will continue to build in the next year. The firm increased its profit growth projection by 5 percentage points to 11%. This upward revision to its 2025 EPS estimate revolves around increased margin expansion. The firm added that the broader macroeconomic backdrop is conducive to slight margin expansion.
Moreover, the firm increased its year-end S&P 500 target to 6,000 points, exhibiting a rise from the prior forecast of 5,600. The investment firm expects a P/E multiple of ~22x for the S&P 500, which remains in line with the company’s macro model of fair value. This will largely remain unchanged over the upcoming 3 months. For 2025, the bank expects the S&P 500 to increase by another ~300 points, to reach the year-end target of 6,300.
Market strategists believe that the momentum in the broader equities is likely to be aided by a blowout September 2024 jobs report, the start of the US Fed’s rate-cutting cycle, and China’s economic stimulus.
Our methodology
To make a list of 8 Best Stocks to Invest in Now, we used stock screeners to find quality stocks that have gained at least 30% on a YTD basis, as of October 7. We also made sure that these stocks were popular among elite hedge funds. The stocks have been arranged in ascending order of their hedge fund sentiment, as of Q2 2024.
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)
% Gain on a YTD Basis: ~165%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) offers graphics and compute and networking solutions in the US, Taiwan, China, Hong Kong, and internationally.
NVIDIA Corporation (NASDAQ:NVDA) has been investing for over a decade in software in such a way that allows its hardware to outperform regular silicon. Such outperformance stems from software optimizations and acceleration libraries which are updated constantly. Moving forward, intangible assets associated with its graphics processing units, and switching costs involved around its proprietary software should continue to act as tailwinds.
Market experts opine that, just like iOS, which locks customers into the iPhone since developers are making applications for the iPhone, NVIDIA Corporation (NASDAQ:NVDA) is also working on the same thing. The AI engineers have been learning the CUDA platform to program GPUs. This should assist in locking the people. NVIDIA Corporation (NASDAQ:NVDA) expects further growth, anticipating Q3 2024 revenue to touch $32.5 billion. The company expects continued expansion in its Hopper architecture and Blackwell products.
The company anticipates to ship several billion dollars in revenue from its Blackwell platform in Q4 2024. Also, NVIDIA Corporation (NASDAQ:NVDA) expects robust growth in the data center business next year. The company sees a strong opportunity in sovereign AI, with countries planning their own generative AI systems. Its strategic focus on Gen AI and enterprise AI should help create additional revenue streams.
JPMorgan Chase & Co. increased its price target from $115.00 to $155.00, giving an “Overweight” rating on 29th August. Vltava Fund, an investment management company, recently released its third-quarter 2024 investor letter. Here is what the fund said:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
Overall, NVDA ranks 2nd on our list of Best Stocks to Invest in Now. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.