10 AI Stocks Investors Are Watching

3.  NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 234

NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks Investors Are Watching. On December 19, Bernstein analyst Stacy Rasgon reiterated an “Outperform” rating on the stock with a $275 price target.

According to the firm, Nvidia is trading at 25-times forward earnings, which puts the stock in the eleventh percentile of valuation over the past 10 years.

“Just How Cheap Is It? Nvidia’s performance has been somewhat challenged as of late…While putting up decent overall performance (with the shares up ~30% YTD), the stock has stagnated since July, and has substantially underperformed the SOX index this year (with the broader semi space up 38% YTD) even as earnings estimates have continued to march ever higher. Consequently, the shares have seen substantial multiple compression with Nvidia’s P/FE falling by 27% through the year, currently sitting just a hair under 25x.

But how cheap is it? 25x P/FE may not seem particularly cheap for your ordinary stock. But this is NVIDIA. For this company, 25x forward EPS would suggest the shares are trading in the 11th percentile of valuation over the last 10 years (i.e., pretty cheap on an absolute basis) (Exhibit 4). And relative to the broader semiconductor industry the situation is much more stark. Relative to the SOX NVDA currently trades at a ~13% discount, in the FIRST percentile; indeed, over the last 10 years there have only been THIRTEEN DAYS where NVDA’s stock traded cheaper relative to the SOX than it is trading now.”

Even though the AI stock has lost some momentum, shares are poised to gain ground in the year ahead, noted the firm. Firm optimism is largely based on capex intentions looking fine, recovering GPU narrative, and Rubin. H200 approvals may also offer some China upside at some point.

“And overall numbers appear likely low in the context of the company’s $500B+ Blackwell/Rubin guidance. Coupled with what appears to be extremely attractive valuation we believe the set-up is looking good into the new year; we would be buyers here.”

NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.