We recently published a list of 7 Best American Stocks To Buy and Hold in 2024. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against other best American stocks to buy and hold in 2024.
Neutral Stance Amid Uncertainties
The tech sector has been showing positive performance amid market concerns, driven by improved earnings estimates and substantial investments in artificial intelligence. Approximately 40% of operating cash flow is currently allocated to AI, raising questions about when these investments will begin to yield returns. The strong profit margins of mega-cap stocks, averaging over 23%, compared to just over 8.5% for other sectors, suggest continued capital inflows into tech companies demonstrating earnings strength. While some consolidation and growth slowdown may occur, there is confidence that investor sentiment will eventually lead to a resurgence in these stocks.
As sentiments shift regarding major tech stocks, other profitable tech companies are maintaining positive momentum in the market. There was a conversation regarding this, covered a few days back in our article about the 10 Most Profitable NASDAQ Stocks To Invest In, where Jason Snipe, Odyssey Capital Advisors principal, discussed the tech sector’s mega-cap momentum, particularly in light of recent mega-cap stock downgrades and significant investor outflows. Here’s an excerpt from his sentiment:
“…This focus on AI has contributed to some recent downgrades but also suggests continued upside potential for select names within the sector.
…He acknowledged that while there may be some consolidation and a slowdown in growth, he believes that investors’ muscle memory will eventually lead to a resurgence in these stocks.
Snipe’s analysis underscores the complexities facing the tech sector amid market volatility and evolving economic conditions. While challenges persist, particularly with mega-cap stocks experiencing downgrades, there are also significant opportunities driven by innovation and strong profit margins that could support continued growth in this space…”
Katie Stockton, Fairlead Strategies founder, joined CNBC’s ‘Closing Bell’ on October 17 and highlighted that there’s a likelihood that the markets could move into choppier territory. Katie Stockton characterized her stance as neutral regarding the indices despite the strength of the trend and the participation of most stocks on the upside. She noted that while short-term momentum is currently positive, particularly behind major indices, there are concerns about potential problems if key players like NVIDIA falter. She highlighted that sentiment appears overly bullish or greedy, as evidenced by the Fear and Greed Index reaching an extreme level of 5%. This situation makes it challenging for the market to sustain overbought conditions, which are prevalent across various timeframes.
Stockton anticipates a pullback or possibly a more significant corrective phase in the fourth quarter for the S&P 500, suggesting that this could mark the beginning of a range-bound environment. She pointed to indicators such as the VIX, which has entered a new higher volatility cycle, and mentioned signs of long-term exhaustion indicated by the DeMark indicators, levels not seen collectively since late 2021. While this does not necessarily signal an impending bear market, it does enhance the likelihood of experiencing a choppier trading environment.
When asked about the recent performance of banks and cyclical stocks compared to defensive stocks, Stockton acknowledged that while there has been a positive move from the financial sector contributing to the S&P 500’s recent gains, it is too early to conclude that this represents a breakout in relative strength for financials. She indicated that most metrics suggest financials will likely perform in line with broader market trends rather than leading them. Furthermore, she expressed concern that mega-cap sectors are poised to lose their leadership position, which could pose challenges to overall market performance.
Regarding small-cap stocks, Stockton noted that while the Russell 2000 index made another attempt at an upside move, closing close to 2,300 with a 1.6% increase, long-term trends still indicate underperformance relative to the S&P 500. She pointed out that there has not been a breakout in the Russell 2000, which remains stalled below resistance levels established during summer highs. Consequently, she does not see actionable opportunities in small caps at this time and anticipates neutral trading conditions for this segment.
On the topic of bonds, Stockton mentioned that Treasury yields have shown some upside momentum but backed off recently. She sees potential entry points in Treasury bond proxies like TLT (iShares 20+ Year Treasury Bond ETF), suggesting signs of short-term downside exhaustion within a broader long-term uptrend for fixed income. She believes there is an opportunity for investors to enter Treasury bond proxies now, while also expecting yields to stall without significant long-term declines.
Her insights highlight her focus on maintaining balance amid prevailing uncertainties in both equity and bond markets.
Methodology
To find the best American stocks, we used Insider Monkey’s proprietary database to find US stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 Holders: 179
NVIDIA Corp. (NASDAQ:NVDA) is a global technology company that designs and manufactures GPUs, AI chips, and other computing technologies. The high-performance GPUs are widely used in gaming, professional graphics, and data centers, and also power AI applications, such as machine learning and deep learning.
The company’s stock has surged 2000% in 5 years due to GPU and AI-related demand. FQ2 2025 revenue soared 122.4% to $30 billion, with net income at $16.6 billion. Increased data center chip demand drove these results. Q3 revenue is projected at $32.5 billion. Blackwell and Hopper Architecture products are expected to perform well. On October 14, its stock hit a record high of $138.07 as the third week of this month began, driven by anticipation for AI infrastructure spending and the company’s dominant 70-95% market share in AI chips.
NetApp’s new AI tool leverages NVIDIA technology. Elon Musk’s xAI is using 100,000 NVIDIA H100 GPUs for its AI project, Colossal. The company has partnered with Accenture and Salesforce to accelerate AI innovation. Its Blackwell AI chip is in high demand, and its Aerial tool optimizes wireless networks. CUDA software provides a competitive edge. Future success depends on continued innovation and effective AI monetization.
Recently, the White House is considering expanding export limits for NVIDIA Corp. (NASDAQ:NVDA) along with AMD AI chips to certain Persian Gulf countries. This follows last year’s restrictions on China and other countries. The move aims to limit the Persian Gulf’s global influence over the AI industry.
The company reported that its Blackwell platforms are now fully operational, so the prior production challenges have been addressed. The company’s CEO believes its AI chip advantage is sustainable. Snowflake, a cloud data warehousing company using NVIDIA Corp.’s (NASDAQ:NVDA) AI Enterprise software, has seen its stock rise 10% due to strong prospects. Positive earnings, revised guidance, and upward stock movement suggest continued growth.
Vltava Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
Overall, NVDA ranks 6th on our list of best American stocks to buy and hold in 2024. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high 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.