3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
Chris Caso, Wolfe Research senior analyst, said in a latest program on CNBC that while NVIDIA Corp (NASDAQ:NVDA) quarterly beat was not as impressive as it used to be in the past, the company can still see more growth in the future on the back of a potential increase in compute demand.
“One of the things that I thought was interesting, and Jensen brought it up in the spot you had about Deep Seek, is the move to reasoning models where the AI actually thinks itself. It doesn’t have the answer itself, but it could figure it out using a couple of steps. You know, what they said was that actually uses 10 times the compute power for inference, for actually running the models, and it does appear that that’s going to be one of the drivers as well.”
Caso said his price target for NVIDIA Corp (NASDAQ:NVDA) is $180 and that takes into account the possible revenue slowdown the company will see in the coming quarters.
“It’s a big gain, and even that just only factors in some deceleration of revenue growth, about, you know, in the 30s next year. So, you know, and that’s what’s compelling about Nvidia as an investment right now because you’re not seeing a bubble valuation, you’re seeing a really reasonable valuation on a company that’s been growing like crazy.”
The market will keep punishing Nvidia for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. Nvidia’s Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. The market does not like when Nvidia fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offers alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU process, set to be produced on its 18A or 14A node.
Brown Advisors Global Leaders Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“The main driver of our 2024 relative underperformance was not being invested in NVIDIA Corporation (NASDAQ:NVDA). Since ChatGPT introduced the power of generative artificial intelligence to the world on 30 November 2022, the Global Leaders Strategy has outperformed its benchmark despite being underweight the USA and specifically underweight the “Magnificent Seven”.7 2024 underperformance of -2.81% versus our benchmark was almost precisely matched by the individual outperformance of NVIDIA, which we did not own. On balance the rest of the portfolio is doing just fine albeit with areas of strength (AI) and weakness (EM financials) discussed below.
We wrote about the concentration within global indexes last year and this continued with only 29% of companies within the ACWI Index at the start of 2024 outperforming this benchmark over the year. Our capital allocation added value in 2024 as five of our top ten largest weights over the year were also in our top ten percentage winners. Conversely, within our ten worst performers, seven were also amongst our smallest ten weights. Capital allocation is critical when index hit rates are below 50%…” (Click here to read the full text)
