We recently published a list of 10 Buzzing AI Stocks This Week. In this article, we are going to take a look at where Nvidia Corp (NASDAQ:NVDA) stands against other buzzing AI stocks this Week.
Paul Hickey, Bespoke Investment Group co-founder, said while talking to CNBC in a latest program that despite the market gains still concentrated in a few names, he’s bullish short and long term because of AI.
“The longer term play is the AI trade. This is an AI bull market. Every bull market has a theme, and ChatGPT was to AI what Netscape and AOL were to the internet.”
Hickey also mentioned the possible scenario where market gains would start to broaden out.
“ChatGPT didn’t invent AI; it made it tangible for consumers and businesses, just like Netscape with the internet. It caused, you know, made it a lot more practical on the part of businesses and the consumer. So I think in that respect, there’s a lot more investment to go, and we’ve seen the infrastructure stocks in AI benefit. But even just last week, some of these software names—and we’re going to slowly start to see that broaden out to the rest of the economy.”
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For this article, we picked 10 AI stocks currently buzzing on the back of latest news and analyst ratings. With each company 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 Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Commenting on Nvidia Corp (NASDAQ:NVDA) results last month, Dan Niles, Niles Investment Management founder and portfolio manager, said that when Nvidia said in its call that the demand would surpass supplies for the next “several quarters,” it set the bar lower for those who “believe the dreams.”
“They just reset the bar lower. Things are going to accelerate as you go into next year, and so, depending, you’re in a really great seasonal time of year for stocks. People just want to believe in the Santa Claus rally.”
Niles then made his case for the expected slowdown and reality check for Nvidia Corp (NASDAQ:NVDA) in the future:
“You’re going to, at some point next year, run into an issue where you’ll need to see a return on investment for the money you’re putting in. Think about Microsoft—they cut estimates after the June quarter report and again after the September quarter report. At their Ignite conference, they even mentioned hitting a wall, potentially with scaling loss.
At some point, there will likely be a pause to digest this. Nvidia revenues, however, could still double over the next several years as there’s a long way to go in building out AI infrastructure. I’m just saying, you’ve got to be honest.”
Simply beating earnings estimates is not enough for NVIDIA Corporation (NASDAQ:NVDA) anymore. The stock fell despite reporting better-than-expected numbers for the latest quarter. However, analysts are sensing a growth slowdown. Nvidia’s Q4 revenue guidance missed the buy-side whisper number of $39 billion, and the company expects gross margins to keep shrinking next quarter. For Q4, non-GAAP gross margin is projected at 73.5%, down from 75% in Q3. NVIDIA Corporation’s (NASDAQ:NVDA) biggest customers, cloud hyperscalers — which account for 50% of its revenue — are increasingly developing in-house AI chips and collaborating with competitors like AMD. This raises concerns about Nvidia’s medium-to-long-term growth in demand and margins.
Columbia Seligman Global Technology Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“The fund held an underweight position in NVIDIA Corporation (NASDAQ:NVDA) relative to the S&P North American Technology Sector, which was a headwind on performance following impressive returns from the company in 2023 and the first two quarters of 2024. NVIDIA’s stock fell during periods of the quarter after the company reported second quarter earnings. While the earnings came in higher than expectations, investors were concerned that the company did not guide earnings high enough, signaling a potential slowdown in AI buildout. NVIDIA’s demand remains strong and the company has forecast orders for upcoming quarters. The question that remains is whether the company can meet the demand for its AI processors and connectivity chips. Our team continues to remain cautious on NVIDIA’s high customer concentration. Microsoft and Meta have driven a significant amount of the company’s revenue, which presents added risk.”
Overall, NVDA ranks 4th on our list of buzzing AI stocks this Week. 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 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.