While Nvidia Corporation (NASDAQ:NVDA) is one of the best-performing stock picks of Claude AI this year, ranking #2 on our list of the 8 best-performing stock picks by Claude AI, many investors still wonder whether the stock can return to the growth of its glory days or whether they should look elsewhere for faster growth. Let’s dig in.
Catalyst 1: Vera Rubin Could Be Nvidia’s Fastest Ramp Yet
Nvidia expects Vera Rubin, its next AI platform after Blackwell, to make up roughly 20% of data center revenue in the fiscal third quarter. Management believes it could become the fastest product ramp in the company’s history. A smooth handoff from Blackwell means Nvidia does not have to pause its growth between product cycles. Brown Advisory’s Global Leaders Strategy highlighted Nvidia in its second-quarter letter, and this piece explains why that investor just bought the stock.
Catalyst 2: A New $200 Billion CPU Market
Nvidia’s Vera processor opens the central processor market to the company, which CEO Jensen Huang puts at $200 billion. Vera could bring in $20 billion of sales this fiscal year, Huang said. RBC Capital says Nvidia has about that much revenue visibility tied to Vera, and that the company’s new sales breakdown shows growing demand beyond the biggest cloud companies.
Catalyst 3: Customers Get Help Paying for Data Centers
An AI data center needs land, power and cooling on top of the chips, and many customers need outside money to build one. Nvidia is helping them find it. It has signed memorandums of understanding with six big financial companies to attract funding, with a target of $500 billion that is not yet secured. It also gives credit support on some deals and has guaranteed up to $105 billion for an Ohio data center campus built for an OpenAI affiliate. More funded projects mean more orders for Nvidia systems. Networking revenue grew 199% year over year in the April quarter, and networking orders often come months before new data centers open. NZS Capital’s Growth Equity Strategy highlighted Nvidia in its second-quarter letter. Read its rationale for adding Nvidia back.
Bear Case: Nvidia Takes On Lender Risk and Faces More Rivals
The financing deals put risks on Nvidia that banks usually carry. If a customer cannot finish or fill its data center, the guarantee can come back to Nvidia. The $105 billion guarantee is the ceiling on its gross exposure, and OpenAI has agreed to cover some losses. Nvidia’s supply and capacity obligations more than doubled in one quarter. Lenders also use shorter depreciation periods for GPUs than Nvidia does, so customers could face stricter loan terms if credit markets doubt GPUs keep their value.
Competition is rising too. Big tech companies are building custom chips, AMD and Intel are pushing hard, and AMD’s shares have outperformed Nvidia’s so far this year. L1 Capital International Fund increased its Nvidia stake in the second quarter and now holds it as a top 5 position. Its letter also asks whether AI is a bubble, and you can see how it separates fundamentals from speculation here.
Valuation: Fast Growth at a Sector-Like Multiple
Nvidia trades at 24.6 times forward earnings. That is 5.7% above the sector median of 23.3 and 41.5% below its own five-year average of 42.1. Revenue grew 83.38% year over year, and management gave a preliminary outlook for roughly 70% revenue growth in fiscal 2028, even with supply constrained through the end of that year. The forward PEG ratio is 0.49 against a sector median of 1.26. Analyst consensus and quant scoring both rate the stock a Strong Buy. Insider Monkey’s own look at the multiple weighs triple-digit sales growth against fears of a slowdown in AI infrastructure spending. See whether the multiple is justified.
If earnings growth fell by half, the PEG would still be about 1.0, below the sector median. Nvidia is already growing at glory-day speed, and Vera Rubin, Vera and funded data center builds give it room to keep going. The financing exposure is the risk to watch in the next earnings report. Nvidia Corporation does not need a perfect outcome to cover its multiple.
While we acknowledge the risk and potential of NVDA as an investment, our conviction lies in the belief that some 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 and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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