We recently compiled a list of the 15 AI News Investors Should Not Miss. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other AI stocks investors should not miss.
Artificial Intelligence developments are making headlines across various sectors. From high-profile legal battles to groundbreaking advancements in model performance and safety protocols, AI is reshaping the landscape across industries at an unprecedented pace.
READ ALSO: 15 AI News Investors Should Not Miss and 20 Trending AI Stocks on Latest News and Ratings
Before we move on to the breaking news on AI, let’s talk about Morningstar’s recent report. The investment research firm reveals that for the third consecutive year, investors are leaving exchange-traded funds related to specific themes for funds linked to broad stock-market benchmarks “that are hitting record highs”. Despite overall growth in equity ETFs, thematic ETFs have lost $5.8 billion in investor capital in the year 2024. This is greater than $4.8 billion outflows in all of 2023. The reason? Broad market index returns are setting a higher bar for thematic funds this year.
“It’s not that people don’t like the idea of themes any longer, but that a bull market dominated by a handful of megacaps makes it hard for any theme to stand out”.
-Aniket Ullal, ETF analyst at CFRA, a market research firm.
As per Morningstar, thematic ETFs often struggle due to mistimed investments, with investors usually missing out on two-thirds of their returns. Despite some AI-themed funds having strong holdings, higher fees and timing challenges reduce their overall appeal.
“I think that when S&P 500 megacaps stop delivering the way they do today, the focus will shift back to thematic ETFs”.
-Taylor Krystkowiak, investment strategist at Themes ETFs, an investment management firm.
Moreover, while AI remains a key focus in many thematic ETFs, its impact goes far beyond investing. Consider Penguin Random House, the first of the Big Five anglophone trade publishers to amend its copyright information. The publisher has recently added a language to its copyright pages to prohibit the use of those books to train AI. Publishers and AI firms will be increasingly clashing in the future if clear guidelines and processes aren’t kept in place. In a similar endeavor, The New York Times has sent Perplexity AI, an AI-powered research firm, a “cease and desist” notice demanding that it stop using the newspaper’s content for generative AI purposes. The news publisher claims that the way the AI Company uses its material violates copyright law.
In other news, Anthropic, a U.S.-based artificial intelligence public-benefit startup, is now adding a comprehensive update to its safety policy, reinforcing the guardrails of its AI as it becomes more capable. This push to improve AI safety is in stark contrast to competitors such as OpenAI, whose increasing focus on improving capabilities and performance is very likely to threaten safety guidelines in the future. As per McKinsey, 63% of companies consider inaccuracy risk to be relevant. However, only 38% of companies are working to mitigate the risk.
While artificial intelligence may be intimidating, it is equally, if not more, beneficial for mankind. In its latest achievement, AI has helped UCLA researchers develop a deep-learning framework that teaches itself to automatically analyze and diagnose MRIs and other 3D medical images. That too, with the accuracy matching that of medical specialists in a fraction of the time. Another breakthrough from Archetype AI, a physical AI company, is set to significantly change how we understand and interact with the physical world. The model, named Newton, shows the unparalleled capacity to generalize across diverse physical phenomena using only raw sensor measurements as input.
Finally, in our roundup of the latest AI news, the US rules that will ban certain US investments in artificial intelligence in China are under final review, as per a government posting. The rules, requiring US investors to notify the Treasury Department regarding some investments in AI and other stem technologies, come from an executive order signed by President Joe Biden in August 2023. The order aims to keep American investors’ know-how from aiding China’s military. Chipmakers and related companies that may be impacted by the decisions denied responding to Reuters’ requests for comment.
Methodology
For this article, we selected AI stocks by combing through news articles, stock analysis, and press releases. These stocks are also popular among 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 global technology company engineering the most advanced chips, systems, and software for the AI factories of the future. The company is said to represent “the dominant” infrastructure player behind the current rise of the AI sector.
Wall Street is abuzz with excitement about NVIDIA Corporation (NASDAQ:NVDA)’s new AI chip, Blackwell. Sector analysts are enthusiastic about the company’s potential major upside in the fourth quarter with all the initial rush of Blackwell. On October 18, Ram Ahluwalia, Lumida Wealth Management CEO, discussed on Yahoo Finance’s Catalysts how things are looking up for NVIDIA Corporation (NASDAQ:NVDA) .
According to Lumida CEO, the company is still in the “early innings” and expects that Nvidia’s stock will reach $150 between now and the end of the year. With the hyperscalers intending to each spend between $50 and $100 billion on GPU compute, the primary beneficiary is going to be NVIDIA Corporation (NASDAQ:NVDA), he says. Lumidia’s CEO further commented how the company has a class of its own and doesn’t have a “close competitor”. There is a growing confidence that the chip giant will be the first Tech firm to reach a $4 trillion valuation.
“We made a call earlier this year that Nvidia would be the most valuable company in the world. It achieved that milestone yesterday, and the demand for GPU chips is strong. And you’re seeing enterprises start to get some ROI (return on investment) on it from the early adopters”.
On Friday, October 18, Bank of America analyst Vivek Arya reiterated his “Buy” rating on the stock, raising his price target by $25 to $190. From Taiwan Semiconductor’s (one of Nvidia’s major suppliers) third-quarter results to the “insane” demand for Blackwell chips as quoted by Nvidia CEO Jensen Huang, the analyst believes that recent industry trends have the potential to increase the company’s lead and generational opportunity. Furthermore, “underappreciated” enterprise partnerships with companies are also catalysts for more growth.
“We also highlight a growing presence of AI in enterprise, where NVDA is the partner of choice (more on pg. 10)”.
– Vivek Arya
According to the bank’s forecast, the AI technology market will grow from $45 billion in 2023 to $117 billion this year while Nvidia maintains a 75% market share, which translated to a staggering $272 billion in AI computing revenues for Nvidia by 2030. Arya also believes the company could see at least $200 billion in free cash flow generation over the next two years.
Overall NVDA ranks 3rd on our list of the AI stocks investors shouldn’t miss. While we acknowledge the potential of 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 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.
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Disclosure: None. This article is originally published at Insider Monkey.
