Top 10 AI Stocks to Watch Right Now

3. NVIDIA Corp (NASDAQ:NVDA)

Number of Hedge Fund Investors: 193

Nancy Tengler from Laffer Tengler Investments said while talking to Schwab Network in a latest program that the latest pullback in NVIDIA Corp (NASDAQ:NVDA) is a good chance to pile into the stock as she believes it will rally again:

“If you look at Nvidia’s backlog, uh if you just kind of pay attention to the anecdote like the one that Larry Ellison uh shared where he and Elon were at dinner with with Jen and just kept saying, please take more of our money, um I think if you pay attention to who’s spending and how much they’re spending that the stock will rally again.”

The analyst said she is adding to her NVIDIA Corp (NASDAQ:NVDA) position on the latest pullback:

“There’s plenty of room I think you know recalibration is never a bad thing and it gives some you know those who aren’t in the stock a chance to get in and those of us who own it we just actually added to our position uh I think it was last week or the week before.”

Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.

Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.

Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.

Manole Capital Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:

“As of this publication, Nvidia is up roughly 150% year-to-date. NVIDIA Corporation (NASDAQ:NVDA) was the largest gainer in the S&P 500 last year and has more than tripled in value over the last year. It hit an eye-opening market capitalization of $3 trillion in June, less than four months after it eclipsed the $2 trillion mark. Enthusiasm for everything AI-related, especially for the primary chip maker whose products are essential to powering AI technology, continues to fuel the market. Last quarter, and for the fifth consecutive quarter, Nvidia reported sales and profits that blew past Wall Street expectations. The stock rose +37% in the second quarter alone.”