We recently published a list of Top 12 AI Stocks Leading ‘Big Tech Race’ to $4 Trillion According to Popular Wall Street Analyst. Since NVIDIA Corp (NASDAQ:NVDA) is ranked fourth on the list, it’s worth a deeper look.
Big Tech giants are now in a “race” to capture the $4 trillion AI market, Wedbush Securities analyst Dan Ives said in a new note, describing GPUs as the technology sector’s new “oil” or “gold.” Ives said the AI ”party” is just getting started and the clock says “9 p.m.” Its a party that lasts until 4am with the rest of the tech world now joining in. Ives believes spending on GPUs and data centers is “the only game in town.” Ives believes the “first wave” of AI has benefited the big tech giants leading the AI race, with second, third and fourth “derivatives” starting to show ripple effects on other companies.
At a separate investment event, Ives recently predicted the AI-led rally would continue for another two to three years, saying that a year from now investors will be looking at $3 trillion to $4 trillion in market cap for big tech companies.
“The tech bull market has only just begun,” Ive reportedly said.
In his latest note, Ive highlighted several stocks that he believes could benefit from the AI revolution. In this article we take a detailed look at these stocks, discuss the growth catalysts associated with AI, and see whether or not they are sound long-term investments. With each stock we mentioned hedge fund sentiment. Why are we interested in stocks that hedge funds accumulate? The reason is simple: Our research has shown that we can beat the market by imitating the best stock picks from the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (See more details here).
Nvidia Corporation (NASDAQ:NVDA)
Number of investors in hedge funds: 186
Wedbush’s Dan Ives believes it’s only “9 p.m.” in the “AI party” that’s set to last until “4 a.m.” and it’s all about Nvidia Corp (NASDAQ:NVDA) GPUs, with the analyst believing “the only game in town The graphics processing units (GPUs) to run generative AI applications all go through Nvidia.
UBS believes Nvidia Corp ( NASDAQ:NVDA ) is well positioned to capitalize on the $331 billion market opportunity in the AI enablement layer, thanks to its GPUs. In the cloud segment of the enabling layer, UBS believes Nvidia Corp’s (NASDAQ:NVDA) DGX offering makes the company a promising player. Nvidia Corp (NASDAQ:NVDA) DGX Cloud is a supercomputing service that gives organizations access to the software and infrastructure needed to train advanced generative AI models. It is a collection of servers and workstations for optimizing deep learning applications by using general purpose computing on graphics processing units (GPGPU).
At the intelligence and application layer of the AI value chain, UBS sees no notable catalyst for Nvidia Corp (NASDAQ:NVDA).
NVIDIA Corp’s (NASDAQ:NVDA) latest product announcements and plans revealed at Computex 2024 show that NVIDIA Corp (NASDAQ:NVDA) has a lot in its arsenal to power its growth engine. Analysts like NVIDIA Corp’s ( NASDAQ:NVDA ) are turning to a new AI architecture known as Rubin (R100) and believe its powerful H100 and Blackwell chips easily outperform competitors.
NVIDIA Corp (NASDAQ:NVDA) will start shipping the H200 in the second half of this year. At its GTC, NVIDIA Corp (NASDAQ:NVDA) unveiled three accelerators – the B200, GB200, and GB200 NVL72. All of these products provide growth catalysts for NVIDIA Corp ( NASDAQ:NVDA ) stock and justify a price-to-earnings multiple of 71, given NVIDIA Corp ( NASDAQ:NVDA ) growth expectations of more than 100% this year and 32% next year. Based on 2026 EPS estimates set by Wall Street, NVIDIA Corp (NASDAQ:NVDA) is trading at a forward EPS of 35.74, making the stock’s valuation attractive given its growth catalysts.
RiverPark Large Growth Fund said the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its report Investor letter for the first quarter of 2024:
“Nvidia company (NASDAQ:NVDA): NVDA shares were our largest contributor this quarter following strong Q4 results and Q1 guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year over year, and earnings per share for the quarter of $5.16, up 487% year over year and 12% ahead of expectations. Q1 revenue guidance of $24 billion was 8% above very high expectations. The AI arms race started by ChatGPT and Alphabet’s Bard, among others, has generated massive demand for Nvidia’s next-generation GPUs.
NVDA is the leading designer of graphics processing units (GPUs) needed for powerful computing processing. Over the past 20 years, the company has evolved through innovation and adaptation from a primarily gaming-focused chip vendor into one of the world’s largest semiconductor/software vendors. Over the past decade, the company has grown its revenues at a compound annual rate of more than 20% while expanding operating margins and, through an asset-light business model, producing increasing amounts of free cash flow. Following the latest results, Jensen Huang, founder and CEO of NVIDIA, said in the company’s press release, “The world’s $1 trillion installed data center infrastructure will move from general purpose to accelerated computing as companies race to apply generative AI into every product, service and way of working.” “
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks fourth on Insider Monkey’s list titled Top 12 AI Stocks Leading ‘Big Tech Race’ to $4 Trillion According to Popular Wall Street Analyst. While we acknowledge the potential of NVIDIA Corp (NASDAQ:NVDA), our conviction is to believe that AI stocks hold greater promise for higher returns, and to do so on a shorter time frame. If you’re looking for an AI stock that is more promising than NVIDIA Corp (NASDAQ:NVDA) but is trading at less than 5 times its earnings, check out our report on Cheapest artificial intelligence stocks.
read the following: The analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these stocks.
Disclosure: None. This article was originally published on Insider Monkey.
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