We recently published a list of Top 10 AI News You Shouldn’t Miss. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against other top AI news you shouldn’t miss.
JPMorgan Asset Management’s Kerry Craig said in a latest program on CNBC that investors are looking beyond the top AI companies amid valuation and spending concerns following the launch of DeepSeek. The analyst said he remains bullish on the “secular theme” of AI and believes there are still opportunities for the market.
“I think playing it now through the market could be a little bit more of less around the hyperscalers and the producers of this technology and then thinking a little bit further along the AI value chain so the users of this technology, the software companies, maybe utilities, and thinking about energy providers and those further opportunities that may be a little bit better valued when it comes to the prospects and the equity market and where you might see better upside. It’s very difficult to keep repeating these very large returns we’ve seen across these names for the last couple of years.”
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For this article, we picked 10 AI stocks currently making moves on the back of the latest news. With each stock, we have mentioned the number of hedge fund investors. 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 Investors: 193
Ben Inker, GMO co-head of asset allocation, explained in a recent program on CNBC why he believes NVIDIA Corporation (NASDAQ:NVDA) is vulnerable and talked about the impact of high expectations on the stock.
“When you have a company where the vast majority of its value is based on growth expectations for the future, there’s a vulnerability there if people change their mind about what they think the future is going to be. So, NVIDIA Corp. (NASDAQ:NVDA) is a very high-quality company; they have an amazing franchise. The reason why they have been vulnerable is because people have assumed that the world is just going to continue to want more and more of those chips at extraordinarily high gross margins for them, and suddenly that may not be so true. It is a tricky problem. You’ve got an amazing company with amazing products. They might not be an amazing investment because that valuation is high.”
Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.
Nvidia’s forward P/E ratio for the fiscal year ending January 2026 is around 31. An EPS surprise of 8.5% was not able to help the stock. A similar trend occurred following the second-quarter earnings after a 5.6% EPS surprise. It’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.
Then there’s competition. Amazon (AMZN) recently disclosed its Trainium 3 chip, which is set to be released by the end of 2025. The chip is expected to be twice as fast with 40% more power efficiency than the previous generation, manufactured on TSMC’s (TSM) cutting-edge N3 technology. Reportedly, technology giant Apple (AAPL) will be a consumer of Amazon’s new silicon.
Alger Spectra Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. In our view, Nvidia’s computational power is a critical enabler of AI and therefore essential to AI adoption. Shares contributed to performance during the quarter, driven by strong demand for its data center products, especially the Hopper H200 chips, which generated double-digit billions in revenue, marking the fastest product ramp in the company’s history. Management provided fiscal fourth-quarter revenue guidance above analyst estimates, along with resilient operating margins supported by robust demand and limited competition. In our view, Nvidia’s leadership in scaling AI infrastructure, including advancements in inference and test-time scaling (i.e., reasoning during inference), is driving adoption among enterprises and startups, providing continued demand for its high-performance chips and software solutions. As older-generation chips are repurposed for inference and new clusters are deployed, we believe Nvidia is well-positioned to capitalize on growing compute needs across AI applications.”
Overall, NVDA ranks 3rd on our list of top AI news you shouldn’t miss. While we acknowledge the potential of NVDA, 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 time frame. 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.