Nvidia Corporation (NASDAQ:NVDA) has slipped after a rough two weeks for AI stocks. But overall, the stock remains on the radar of major investors. Two famous billionaires in the hedge fund industry held it in the second quarter, and it ranks first in our list of 7 AI stocks billionaires Ken Fisher and Paul Tudor Jones were buying.
Nvidia is expected to report earnings in November, so investors are asking if the dip is a chance to buy.
What Pulled Nvidia Lower
Nvidia fell more than 3% on October 14 as worries about AI debt hit chip stocks, and it slid again the next day. CoreWeave, a cloud company that rents out Nvidia chips and carries heavy debt, lost about 25% last week as its bonds sold off. Hotter inflation data pushed Treasury yields above 5%, which makes it more expensive to finance data centers. Chip stocks bounced on Monday after nine straight losing days, and Nvidia now trades around $218 a share, below the record high it reached in early October. We covered whether Nvidia still has room to run after that run.
Why Bulls Keep Buying
Nvidia sells the chips every big AI project needs, and it has locked up the scarce parts to keep selling them. Management expects revenue to grow about 70% in fiscal 2028, and Nvidia more than doubled its purchase commitments for memory and manufacturing capacity in one quarter to deliver that growth. Customers keep asking for more computing power than they can get. Microsoft’s Azure cloud grew 43% in its latest quarter, and customers want more capacity than the company can supply, which we covered in our look at whether Microsoft’s AI spending is paying off.
Fund managers keep adding to the stock. L1 Capital raised its Nvidia stake in the second quarter and now counts it among its five largest holdings, according to its investor letter, which we covered in Nvidia Strengthens with Improving AI Capabilities and Stronger Capital Expenditure. NZS Capital also added Nvidia back to its growth equity strategy, and we covered the rationale for adding back the stock. The number of hedge funds holding Nvidia rose to 285 in the second quarter from 275 in the first, according to Insider Monkey’s database.
What Worries the Bears
Nvidia’s customers pay for much of the AI build with borrowed money, and the stock suffers when lenders get nervous. CoreWeave’s bond yields climbed to about 15% last week, and most neocloud providers will cease to operate independently by 2030, Gartner said in a report. Nvidia owns about 10% of CoreWeave and has agreed to buy any capacity it cannot sell through 2032. Nvidia also agreed to provide credit support for an OpenAI data center project in Ohio, so a slowdown in AI spending would hit it from both sides. Its biggest customers are also building their own chips. Microsoft unveiled its third-generation Maia chip, which we covered in our look at whether Claude was right about Microsoft.
What to Watch on Earnings Day
Nvidia beat analyst earnings estimates in the last report, and investors will look for another beat. They will also watch whether management confirms the 70% growth outlook for fiscal 2028, how the Vera Rubin chip ramp goes, and whether gross margin dips to the 71% to 72% range guided for the fourth quarter. Customer payment timing matters too, since days sales outstanding rose to 60 in the second quarter.
Holding Nvidia through swings has been hard for even the best investors. Stanley Druckenmiller has said he regrets selling too early, which we covered in his list of the 10 best AI stocks. Nvidia looks like a buy on the dip if its customers keep finding the money to pay for chips. Investors who worry about AI financing can wait for the November report to see how that demand holds up.
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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