1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a program last month said that he advised his investing club members to sell “some” NVIDIA Corp (NASDAQ:NVDA) shares amid losses. Cramer mentioned how he felt for recommending selling shares of a company he’s long supported and admired:
“This morning, my colleague David Faber asked me how I felt about two stocks in particular that I’ve long championed, Apple and Nvidia. He heard that I had violated my own long-standing discipline to own them, not trade them, something I have said repeatedly to members of the CNBC Investing Club, and that I told people to do some selling. I told him that indeed, at the beginning of last week, I did advise people to sell some Nvidia and Apple. Every Sunday, see, I do this think piece for investing club members. The Sunday before last, I did this gut-wrenching piece. I said that I could no longer stand by and have these two fantastic stocks be eviscerated, so people had to sell some of them. In retrospect, it was a great time to sell. I mean, hindsight, I know, but these stocks have been crushed in the interim. Then, last Wednesday, in a heartfelt emotional talk with investing club members, I reiterated that Apple and Nvidia had to be parted with because I couldn’t see a path to avoid big declines. Fortunately, if you listened to me, you just avoided the latest declines. Unfortunately, there’s been some serious damage to these stocks.”
Cramer is right to change his view. The market will keep punishing NVIDIA Corp (NASDAQ:NVDA) 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 Corp (NASDAQ:NVDA) 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 it when NVIDIA Corp (NASDAQ:NVDA) 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 Corp (NASDAQ:NVDA) 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 Corp (NASDAQ:NVDA) access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. NVIDIA Corp (NASDAQ:NVDA) 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 Corp (NASDAQ:NVDA) 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, set to be produced on its 18A or 14A node.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the undisputed leader in accelerated computing, with dominant market share in Graphics Processing Units (GPUs) powering AI workloads across data centers, edge devices, and emerging platforms. Its end-to-end ecosystem—from silicon to software (CUDA, networking, and AI frameworks)—creates high switching costs and a widening competitive moat. With secular demand for AI infrastructure still in its early innings, Nvidia stands to benefit from sustained topline growth and strong operating leverage. In early January, a little known Chinese AI company, DeepSeek, released its large language model (LLM), DeepSeek-R1, to an unexpecting world. This model was purportedly trained on very few high-end Nvidia chips and was highly efficient when compared to other leading models. This release set off a chain reaction where investors have had to grapple with the idea that the world may not need as many GPUs as previously thought, which hampered the Nvidia buy case and sent the P/E multiple down to its cheapest level in the past 5 years.”
While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than NVDA and that has 100x upside potential, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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