1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a CNBC program in May discussed the importance of trusting the honest leadership of companies and sticking to their core business thesis despite tough times. To prove his point, Cramer gave the example of NVIDIA Corp (NASDAQ:NVDA):
“It matters when honest, smart executives tell you that something’s going incredibly well. I think you should believe them. This can be a very profitable strategy if you get it right. I give you the best example ever: when Jensen Huang, the visionary CEO of Nvidia, came on the show in September 2022, the stock had been eviscerated for the better part of a year. Everybody was giving up on tech in the face of the Federal Reserve’s relentless rate hikes. The stock had been beaten down to the 120s, but he told an incredible story about Nvidia’s ability to reinvent itself, including the notion of what artificial intelligence can really do if it’s powered by the right engine—Nvidia’s engine. Less than 30 years after Nvidia had been planning for ages, they had the best chips by far, and they built them out aggressively in advance. By the spring of 2023, Nvidia is making new all-time highs. By the way, we told you to stick with this one for the Charitable Trust because Jensen earned the benefit of the doubt. Nvidia was always able to reinvent itself in the past, so we told you to hang on even when things were at their most ugly in the great tech bear market of 2022.”
Nvidia shares have gained about 43% since May 10. Nvidia’s Hopper Infrastructure and now Blackwell form the core of AI infrastructure for LLM training and inference. But Nvidia’s growth is slowing compared to previous quarters amid competition and capex spending limitations from major companies. In the recently reported quarter, Nvidia’s annual revenue growth came in at 56%, compared with nearly 100% YoY growth in the past.
With its strong position in the data center market and rising demand, Nvidia is likely to keep growing, though not at the same pace it has in the past. Increasing competition from major companies like Broadcom is also expected to impact Nvidia’s margins in the long term.
Baron Technology Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor and systems company specializing in compute and networking systems for accelerated computing. Its unmatched leadership in AI infrastructure, spanning GPUs, systems, software and networking solutions, continues to drive robust performance. However, NVIDIA’s stock came under pressure during the quarter, as media and investor narratives shifted toward skepticism, ranging from concerns over slower AI adoption to DeepSeek-related fears that future AI training and inference workloads may become more compute-efficient, reducing demand of accelerated computing systems. As discussed above, we believe these concerns are premature. Training cluster buildouts are progressing in line with expectations, while inference will progressively and steadily scale with usage as enterprises integrate AI into real-world workflows and consumers continue to adopt AI applications, such as ChatGPT, Grok, and Perplexity, to name just a few. Moreover, as we shift from standard Gen 1 (“gut based”) AI models to reasoning Gen 2 (long thinking) models, the query response can demand about 100 times more inference compute to provide a better answer. In contrast to these skeptical narratives, NVIDIA delivered a strong January 2025 quarter, which exceeded Street expectations, driven by data center compute revenues growing 93% year over year to $35.6 billion, with $11 billion of revenue from NVIDIA’s new Blackwell architecture, the fastest product ramp in the company’s history. On the February earnings call and at the GTC conference in March, CEO Jensen Huang reiterated a number of NVIDA growth drivers, including: (1) accelerated (GPU-based) computing architectures replacing legacy (CPU-based) computing architectures; (2) multiple generative AI scaling laws, including pre-training (more data, more compute, smarter models), post-training using reinforcement learning from human and AI feedback, and inference with test-time, long-reasoning compute; (3) agentic AI (autonomous, non-human workers); and (4) physical AI (robots, EVs, etc.).”
While we acknowledge the potential of NVDA, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than NVDA and that has 100x upside potential, check out our report about this cheapest AI stock.
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