We recently published a list of Top 7 AI Value Stocks That Are “Slot Machines” According to New York University’s Aswath Damodaran. Given that NVIDIA Corporation (NASDAQ:NVDA) is ranked 4th on the list, it deserves a closer look.
Aswath Damodaran is a professor of finance at New York University’s Stern School of Business. His thoughts on economics and stock valuation are very important to analysts. In a recent interview with CNBC, Damodaran said that Magnificent Seven stock has become “the value stock for investors who care about earnings and cash flow.”
“If you look at the last 18 months, these seven companies have added $8.8 trillion in market capitalization… just these seven companies. To give you an idea, the second largest market in the world, China, has a market capitalization of $12.1 trillion. These seven stocks alone have added more market capitalization than the entire German market, the French market, and the Swiss market.”
Damodaran’s comments are significant because he has repeatedly said in the past that big tech companies are either completely or overvalued. In September, he told CNBC that if you look at the list of major tech stocks, “you’re more likely to be overvalued than undervalued.”
But in his latest interview, Damodaran said that before we “dismiss” Mag. 7’s stock as a “risky tech company,” we should keep in mind that “they are the money machines of this market.”
However, when asked if he thought we were in some sort of “danger zone,” the professor replied that we were in the danger zone not only for these seven stocks, but for the market as a whole.
In this article, we look at Mag 7. stocks and their AI-related growth catalysts. For each stock, we’ve mentioned the number of hedge fund investors. Why are we interested in stocks that hedge funds are heavily invested in? The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- 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 Corp Inc (NASDAQ:NVDA)
Number of hedge fund investors: 186
Aswath Damodoran has been skeptical of NVDA in recent months, repeatedly saying the stock appears overvalued. In March, when asked about his previous (and ultimately wrong) forecasts for NVDA’s valuation, the professor said he either had “no idea what he’s talking about” or that it was the market that simply didn’t get it.
Aswath Damodoran said at the time that even if Nvidia was in the driver’s seat of AI development, its path to profits would not be as smooth as the market assumes.
Recently, Oppenheimer’s Rick Schafer joined the NVIDIA Corp (NASDAQ:NVDA) chorus, raising the chipmaker’s price target from $110 to $150 after the stock split to 10-1.
NVIDIA Corp (NASDAQ:NVDA) is one of the stocks that is making up a significant portion of the market’s total return, thanks to its AI-powered rally that shows no end in sight. Shares of NVIDIA Corp (NASDAQ:NVDA) have gained about 206% over the past year.
Barclays’ Tom O’Malley recently offered some bullish comments on the stock, with a $145 price target and an Overweight rating. The analyst highlighted a potential $25 billion opportunity for countries that build AI capabilities. O’Malley expects NVIDIA Corp (NASDAQ:NVDA) to report earnings of $3.62 per share for fiscal 2026, while Wall Street analysts on average have an estimate of $3.55 per share for NVIDIA Corp (NASDAQ:NVDA)’s 2026 earnings.
NVIDIA Corp’s (NASDAQ:NVDA) latest product announcements and plans unveiled at Computex 2024 show that NVIDIA Corp (NASDAQ:NVDA) has a lot more to offer to fuel its growth engine. Analysts like NVIDIA Corp’s (NASDAQ:NVDA) move to a new AI architecture known as Rubin (R100) and believe its powerful H100 and Blackwell chips easily beat its competitors.
NVIDIA Corp (NASDAQ:NVDA) will begin shipping the H200 in the second half of this year. At its GTC conference, NVIDIA Corp (NASDAQ:NVDA) unveiled three accelerators: B200, GB200, and GB200 NVL72. All of these products are growth catalysts for NVIDIA Corp (NASDAQ:NVDA) stock and justify its price-to-earnings multiple of 71, given NVIDIA Corp (NASDAQ:NVDA)’s forecast growth of over 100% this year and 32% next year. Based on Wall Street’s 2026 EPS estimate, NVIDIA Corp (NASDAQ:NVDA) is trading at a forward price-to-earnings multiple of 35.74, making the stock attractively valued given the growth catalysts it has.
Meridian Hedged Equity Fund said the following about NVIDIA Corporation (NASDAQ: NVDA) in its Q1 2024 investor letter:
“NVIDIA Corporation Nvidia Corp. (NASDAQ: NVDA) is a leading developer of graphics processing units (GPUs) for the gaming and professional markets, as well as system-on-chip units for the mobile computing and automotive markets. The company has recently seen strong performance driven by strong demand for its data center products, particularly those related to artificial intelligence. A key driver of Nvidia’s recent success has been the growing adoption of its GPU accelerators for AI training and inference across a variety of end markets. The company’s GPUs have become an industry standard for training large language models (LLMs), and its networking solutions, such as NVLink and InfiniBand, are critical to maximizing the performance of AI systems. Nvidia’s latest Blackwell GPU platform is expected to further extend its lead in the AI accelerator market, with significant performance and total cost of ownership advantages over its predecessors. As the AI market continues to expand with increasing adoption in enterprises and sovereign nations, we expect Nvidia to maintain its dominance and see sustained growth in its data center business. Beyond data center, Nvidia also benefited from strong demand in its gaming business, which recovered after a period of inventory digestion in 2022. The company’s gaming GPUs were well-received and its focus on the high-end market supported average selling price growth. Going forward, we expect the gaming market to remain healthy with continued growth potential. Nvidia also sees opportunities to diversify its business and foray into new markets, such as automotive and robotics. We continued to maintain our position in Nvidia.”
Overall, NVIDIA Corporation (NASDAQ:NVDA) ranks 4th on Insider Monkey’s list of Jim Cramer’s Latest Portfolio: Top 10 Stocks of July. While we recognize the potential of NVIDIA Corporation (NASDAQ:NVDA), we believe AI stocks have more promise to deliver higher returns, and in a shorter time frame. If you are looking for an AI stock that is more promising than NVIDIA Corporation (NASDAQ:NVDA) but is trading at less than 5 times earnings, check out our stock report the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.