We recently compiled a list of the 10 Best High Growth Stocks To Buy. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other high growth stocks.
At Wall Street, long-standing investment strategies are being reshuffled as the monetary and political landscape evolves. Reallocation is the name of the game in a week where the S&P 500 and Nasdaq experienced declines of 1.97% and 3.65%, respectively, marking their largest weekly losses since April. Conversely, the Dow advanced 0.72%, and the small cap-focused Russell 2000 climbed 1.68%. A few tech mega-caps—led by Apple Inc., NVIDIA Corporation, Meta Platforms, Inc., and Amazon.com, Inc.—have dominated stock market returns, especially over the last 18 months, a trend that is evident in the diverging performances of the largest 50 stocks in the S&P 500, weighted by market capitalization. This trend, however, seems to have reversed sharply recently, with mega-caps selling off while the average stock holds close to record levels.
Investors are grappling with this sudden shift, and one possible explanation is that mega-caps may have become too expensive. “The stock market is experiencing a long overdue rotation,” said Glen Smith, chief investment officer at GDS Wealth Management. “Investors are pulling money out of high-performing big tech stocks and reallocating it to other market areas.” Notably, tech giants like NVIDIA Corporation, previously popular among options traders, saw a notable shift in sentiment, with demand for bearish puts surpassing calls at the highest rate in five months. “It signals a different regime,” said Erika Maschmeyer, a portfolio manager at Columbia Threadneedle Investments. “The market could be choppier and more volatile, with more dispersion than we have seen.”
This divergence has reassured some Wall Street experts who had been concerned about the rally’s dependence on a few massive tech stocks. Additionally, rising optimism about forthcoming interest rate decreases from the Fed has bolstered smaller and more cyclically oriented names. In that regard, the Fed’s battle against inflation might be nearing its end after U.S. consumer prices unexpectedly fell in June. Chicago Fed President Austan Goolsbee considers the latest inflation data “excellent” and describes persistent housing inflation improvement as “profoundly encouraging.” However, Scott Rubner of Goldman Sachs is skeptical about buying the dip. The tactical strategist believes the S&P 500 has little room for upward movement from its current position. He points out that historically, July 17 has marked a turning point for the equity benchmark, with data dating back to 1928 supporting this claim. Rubner notes that August typically sees the worst outflows from passive equity and mutual funds.
On another note, the U.S. economy added slightly more jobs than expected in June. Nonfarm payrolls increased by 206,000 for the month, surpassing the Dow Jones forecast of 200,000 but falling short of the revised May gain of 218,000, which was significantly reduced from the initial estimate of 272,000. However, the unemployment rate unexpectedly rose to 4.1%, matching the highest level since October 2021 and presenting a mixed signal for Federal Reserve officials considering their next monetary policy move. The jobless rate was forecasted to remain steady at 4%. Although June job creation exceeded expectations, much of this growth was driven by a 70,000 surge in government jobs. Additionally, the health care sector, a consistent leader, added 49,000 jobs, while social assistance contributed 34,000 and construction increased by 27,000.
The 2024 presidential election is heating up, with President Joe Biden opting not to run for re-election and Republican nominee and former President Donald Trump continuing his campaign after surviving an assassination attempt. Historically, presidential election years have often brought strong returns for stock investors, influencing short-term economic policy. However, recent events suggest that this election year may be far from typical.
Our Methodology
To compile our list of the best high growth stocks to buy, we identified companies with strong sales growth over the past five years. These companies were then ranked based on the number of hedge fund investors in the first quarter of 2024, out of a total of 919 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: 186
Annual Sales Growth Over the Past 5 Years: 46.68%
Headquartered in Santa Clara, California, NVIDIA Corporation (NASDAQ:NVDA) is a leading multinational technology company renowned for designing and selling GPUs (Graphics Processing Units) used in gaming, cryptocurrency mining, and professional applications. NVIDIA also develops chip systems for various sectors, including automotive, robotics, and other technologies.
NVIDIA Corporation (NASDAQ:NVDA)’s stock has maintained its impressive rally this year, pushing the AI chip leader’s valuation past $3 trillion, surpassing tech giants like Microsoft and Apple. The surge was further fueled by a bullish call from Rosenblatt Securities, which raised its price target on the NVDA stock to a street-high of $200, up from $140, indicating nearly 50% upside from its current price.
Rosenblatt’s price target hike reflects a strong outlook for NVIDIA Corporation (NASDAQ:NVDA)’s earnings, predicting that the company’s earnings per share will exceed $5 by 2026. The firm forecasts continued market share gains for tech giant from both existing and upcoming AI chips. Key products like Hopper, Blackwell, and Rubin are expected to help NVIDIA bolster its market position, with future gains anticipated in AI-related infrastructure, including adjacent networking Switch/NiC/DPU segments. Rosenblatt also highlights NVIDIA Corporation (NASDAQ:NVDA)’s software, which complements its hardware and is pivotal to its future growth narrative.
In the first quarter of this year, Insider Monkey’s research showed that 186 out of 919 hedge funds had invested in NVIDIA Corporation (NASDAQ:NVDA). Among these, Rajiv Jain’s GQG Partners was the largest shareholder, with a $12.07 billion investment in the company.
Overall NVDA ranks 1st on our list of the best high growth stocks to buy. You can visit 10 Best High Growth Stocks To Buy to see the other high growth stocks that are on hedge funds’ radar. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that under the radar 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.