1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors in Q1 2024: 186
1 Yr Revenue Growth: 126%
Bridgewater Associates’ Q1 2024 Stake: $636 million
NVIDIA Corporation (NASDAQ:NVDA) is the GPU designer that’s at the heart of the AI race. Its biggest competitive moat are its GPUs, which are NVIDIA Corporation (NASDAQ:NVDA)’s bread and butter and its primary products. These have allowed NVIDIA Corporation (NASDAQ:NVDA) to have a three year revenue growth of 267% and propelled it to a $3 trillion+ market capitalization. Its GPUs also enjoy a tight link with NVIDIA’s CUDA platform that enables users to tightly control their use. However, while they provide NVIDIA Corporation (NASDAQ:NVDA) with a considerable competitive moat, the biggest concern for the firm is its large customers developing in house products. On this front, the latest updates come from OpenAI’s Sam Altman and Elon Musk, both of whom are either interested in developing their own AI chips or using already developed custom chips to compete with NVIDIA. Therefore, NVIDIA Corporation (NASDAQ:NVDA) has to keep up its competitive edge, and as of now, its next generation Rubin AI platform is slated to launch in 2026.
Polen Capital mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter. Here is what the firm said:
“For the second quarter in a row, NVIDIA represented the top detractor to relative performance as the stock climbed another 37%, bringing the year-to-date return to +150%. As of this writing, NVIDIA is the third largest company in the world, but for a brief moment, it surpassed Microsoft to become the largest company in the world. Yet again, the company delivered blowout results that surpassed already lofty expectations, reinforcing the narrative that NVIDIA is the only obvious “AI winner” due to the amount of revenue it is currently generating.
However, our research indicates that most businesses are only experimenting with GenAI rather than actual, proven use cases. This means it is possible that the huge infrastructure build out and ravenous demand for GPUs and AI servers may be ahead of the true demand for that infrastructure. It’s one more indication of the wider range of possible outcomes we see for future 3-5-year revenue growth than we are comfortable with at the company’s current valuation. In prior commentaries, we have spoken at length about the cyclicality of NVIDIA’s business and the potential for significant changes in its revenue and earnings growth from year to year.
We believe NVIDIA is a highly advantaged business, but we observe that much of the demand for their chips and servers is ahead of the need for hardware from real-world businesses. Therefore, we are cautious, especially when considering the company for a concentrated portfolio of durable growth businesses. Market expectations are elevated as the company has already achieved a $3+ trillion market capitalization. Meanwhile, our research shows that few companies are deploying GenAI beyond pilot projects, and even fewer have earned satisfactory returns on their GPU-related investments to date (graphics processing units).”
While NVDA tops Ray Dalio’s revenue growth stocks, 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 MSFT 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.
