2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
Dom Rizzo, T. Rowe Price portfolio manager of global tech fund, said in a recent program on CNBC that he’s bullish on NVIDIA Corporation (NASDAQ:NVDA) and talked about several reasons to be positive on the stock.
“I really think Nvidia is quite attractive here and there are a couple of reasons why. Well, let’s take a look at the valuation first. The stock is trading in line with the socks index now and is trading at only a slight premium to the S&P 500. If you look at it historically, that’s where the stock’s bottom on a valuation perspective. But more importantly, we have improving fundamentals from here. Gross margins should probably bottom in the April or June quarter and improve to that mid-70% level as we head throughout the rest of the year. If you look at the supply chain, things are looking really positive for Nvidia. Hon Hai reported its February numbers this morning. They’re the biggest partner for Nvidia, and the February numbers were up 56% year-over-year in terms of revenue. If you look at the fundamentals of other parts of the supply chain, memory prices are starting to increase for both DRAM and NAND, both up mid-single digits off the bottom. Finally, probably most importantly, if you look at Nvidia’s revenue growth from here, we’re going to keep seeing sequential acceleration. So, I kind of put it together, and I like the setup in the stock.”
However, it won’t be a rosy ride for NVDA. The company 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, offer 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.
RiverPark Large Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA): NVDA was a top contributor in the fourth quarter following blowout 1Q results and guidance driven by strong data center sales (+427% year-over-year). The company reported revenue of $26 billion, up 262% year-over-year, and EPS of $6.12, up 462% year-over-year and 9% ahead of expectations. Revenue guidance for 2Q of $28 billion was 5% above very high expectations. The artificial intelligence arms race, kicked off by ChatGPT and Alphabet’s Bard, among others, has generated tremendous demand for Nvidia’s next generation graphic processors.
NVDA is the leading designer of graphics processing units (GPU’s) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company’s press release, “a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”
