We recently compiled a list of the 10 Best American Stocks To Buy For Foreign Investors. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other American stocks.
With August Ending, What Can We Expect From US Markets?
Historically, September is considered to be the worst month for stocks. The S&P 500 index has generally averaged a decline in the month of September for decades, which has resulted in many financial news reporters, such as the Wall Street Journal, dubbing September as a weak month for US stocks. So with August coming to an end, many investors in the US and abroad may be wondering whether now is a good time to pick up US stocks for their portfolios.
While history can often be an accurate indicator of stock performance, this is not always the case. This year may very well be an outlier in the historical trend outlined above, seeing as many financial analysts are expecting the US Federal Reserve to move ahead with a rate cut this September. CNBC’s “Power Lunch” on August 21 highlighted that according to the Fed’s recent meeting minutes, it is quite probable that we will be seeing a rate cut this September, which will probably result in stock prices rising and the markets performing better. This is because when a rate cut is announced, consumers and businesses tend to increase their spending and investment, which has a direct and positive impact on stock prices, causing them to rise. As such, if we do see a rate cut next month, investors may actually benefit from investing in American stocks.
How Would a Potential Rate Cut Impact The Markets?
On August 22, Tom Lee, Fundstrat Global Advisors Managing Partner, joined CNBC’s “Squawk Box” to discuss the status of the US markets at present. Here’s what he had to say:
“The FMOC minutes that came out yesterday showed the Fed staff saying this is a strong labor market, while that jobs report that came out Friday and the revisions that just came out show a lot of jobs disappearing. It’s not a stronger market, and I think it gives more ammunition for the Fed to start a cutting cycle, and that’s gonna give a lot of life to the economy and to the markets. Especially cyclical stocks and small-cap stocks.”
According to Lee, investors looking to buy into US equities right now would benefit greatly from a rate cut if it does come about in September. A major beneficiary of such a cut would actually be the tech sector. In this regard, Lee said the following:
“I think tech is still in a good place because of AI, and NVIDIA should reinforce that. It’s not a demanding multiple, maybe 28x forward earnings, which is, for the best, one of the most important companies in the world, not a high multiple. So, if tech is in a good place, and then we get fed cuts, I think it allows the whole overall market to expand.”
Considering the above, US markets may actually be a good place to invest for foreign investors at present, and within these markets, tech may be a good place to start. This is why we’ve compiled a list of the best American stocks to buy for foreign investors, comprising most tech companies. Our list includes some of the best American tech stocks to buy, alongside some of the top US stocks for foreigners.
Our Methodology
We selected the most popular American stocks among major hedge funds to compile our list, by using Insider Monkey’s hedge fund data for the second quarter of 2024. These companies are considered to be the best US stocks to invest in today according to major institutional investors, and should thus be considered by foreign investors looking to buy into American equities.
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 Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor company well-known to anyone interested in the AI market. Many investors like this stock because, at present, returns are becoming increasingly concentrated in a handful of tech names, and NVIDIA Corporation (NASDAQ:NVDA) is one of them, making it a stock you just can’t miss out on.
NVIDIA Corporation (NASDAQ:NVDA) is known to be a company experiencing rapid growth. In the second quarter alone, the company grew its quarterly revenues to $26 billion, representing a growth of 262% year-over-year. The main catalyst for this growth is the increasing demand for graphics processing units, which NVIDIA Corporation (NASDAQ:NVDA) supplies. The company is currently nearing a new product cycle, with Blackwell going into production in the third quarter, which only bears testament to this demand’s existence. We thus consider NVIDIA Corporation (NASDAQ:NVDA) to be among the top American stocks to buy now for any investor, because demand for its products only seems to be going up, resulting in growth continuing.
In the second quarter, 179 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA), with a total stake value of $53.7 billion.
Aoris Investment Management mentioned NVIDIA Corporation (NASDAQ:NVDA) in its second-quarter 2024 investor letter:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
Overall NVDA ranks 6th on our list of the best American stocks to buy for foreign investors. While we acknowledge the potential of NVDA as an investment, 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.