In this article, we discuss the 5 best stocks to buy for your child. If you want to read our detailed analysis of these companies, go directly to the 10 Best Stocks to Buy for Your Child.
5. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 80
NVIDIA Corporation (NASDAQ: NVDA) ranks 5th on the list of 10 best stocks to buy for your child. The California-based tech firm manufactures GPU used in high-end video games and crypto mining. The chip-maker is expanding its way in the field of artificial intelligence and high tech. Over the last year, the company spent 22.5% of its sales on research and development, one of the highest rates among tech behemoths. NVIDIA Corporation pays an annual dividend of $0.64 per share with a yield of 0.09%.
The company has a market cap of $439 billion. NVDA stock has offered more than 100% returns to investors in the past twelve months. The company’s revenue in the first quarter that ended on May 2, 2021, came in at $5.7 billion, an increase of 84% from $3.1 billion in the same period in 2020. On May 27, Truist Securities maintained a Buy rating on NVIDIA Corporation, with a price target of $768 per share. The stock currently trades at $704.76 per share.
NVIDIA Corporation (NASDAQ: NVDA) announced in September 2020 that it will pay $40 billion to Softbank for Cambridge-based semiconductor and software business Arm Ltd., making it one of the largest tech acquisitions ever.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based hedge fund company Citadel Investment Group is a leading shareholder in NVIDIA Corporation (NASDAQ: NVDA) with 2.56 million shares worth more than $574 million.
In its Q1 2021 investor letter, SaltLight Capital Management, an investment management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ: NVDA) was one of them. Here is what the fund said:
“In this letter, we highlight one ‘bet’: a follow-up on our December letter where we wrote extensively about our broad thesis about the Artificial Intelligence opportunity. We present a case study of NVIDIA who we believe is delightfully positioned to capture this opportunity.
Unfortunately, for some readers, again this letter tends to overflow in technical IT jargon. Part of our mission is to educate co-investors about our thinking over the long term. We attempt our best to moderate complexity, however, sometimes the technical analysis is the only way to reinforce the thesis.
Encouragingly, we continue to find global opportunities to deploy capital. We remain cautious on South Africa and believe that, overall, the distribution of outcomes is skewed to the downside despite the recent mean reversion in share prices. We believe that we own the best of the South African opportunity set. Therefore, the majority of incremental capital in the fund is being deployed into global opportunities.
Notwithstanding, we’ve increased our position in one South Africa business that will directly benefit as the population is vaccinated. We’ve also participated in two special situations that are still yielding satisfactory returns on capital.
A quick read of our factsheet will show high cash balances. This is slightly misleading as a substantial portion of the cash is backing derivative exposures that are not reflected in the disclosure.
NVIDIA is one of our portfolio companies that, we believe, has considerable potential. Their recent GTC conference confirmed some elements of our long term thesis:
• As leading enterprise customers started to find competitive advantages adopting AI solutions, their competitors would need to heavily invest in keeping up.
• NVIDIA is creating layers of ‘tools’ to solve the input and output bottleneck challenges that we mentioned in our December letter.
• On top of this, and fortunately for us, geopolitical and COVID-related factors added further tailwinds and a well-known shortage of semiconductors across the industry ensued.
Speak to your brother-in-law who works in IT and he would probably associate NVIDIA as a gaming hardware company. However, over the last few years, NVIDIA has been building an AI platform company with integrated hardware, developer ‘middleware’ and AI applications. Gaming has funded this platform, but AI is likely to define NVIDIA over the next decade.
As an aside, we think co-founder and CEO Jensen Huang, is one of the most impressive CEOs that we’ve come across. It is customary amongst tech CEOs to have a signature clothing ensemble; Jensen is no different and he frequently sports a ‘glossy’ black leather jacket. Since the COVID-era, Jensen has presented all of NVIDIA’s product launches from his kitchen. For those not familiar with the sector, it is worthwhile contextualizing how they got here.
One of the key inputs in AI is the hardware for computational power – particularly deep learning models. Compute power is determined by semiconductor architecture, packaging, and the software layer to extract maximum performance.
Gaming has funded the future AI platform
Whilst Intel will be associated with dominating the central processing unit (CPU), NVIDIA almost already owns the space for Graphics Processing Units (GPUs); the primary reason – gamers.
Toward the end of last year, the company………..[read the complete letter here]