We recently published a list of The 7 Best AI Value Stocks That Are ‘Money Machines’ According to NYU’s Aswath Damodaran. Since NVIDIA Corporation (NASDAQ:NVDA) ranks 4th on the list, it deserves a deeper look.
Aswath Damodaran is Professor of Finance at New York University’s Stern School of Business. His opinions on the economy and stock valuations are given a lot of weight by analysts. Damodaran in his recent interview with CNBC said Magnificent Seven shares have become “value stocks for investors who care about earnings and cash flow.”
“We look at the last year and a half, they’ve added $8.8 trillion in market capitalization … just these seven companies. Just to give you perspective, the world’s second largest market, China, has a market cap of $12.1 trillion. These seven stocks alone have added more to the market capitalization than the entire German market, the French market, the Swiss market.”
Damodaran’s comments are significant because he has repeatedly said in the past that major tech companies are completely or overvalued. In September, he told CNBC that if you go through the list of top tech stocks, “you’re more likely to be overvalued than undervalued.”
But in his latest interview, Damodaran said that before we “dismiss” Mag. 7 stocks as “dangerous technology companies”, we must keep in mind that “these are the money machines in this market”.
However, when asked if he believes we are not in any kind of “danger zone”, the professor said that we are in the danger zone not only in terms of these seven stocks, but also for the market in general.
In this article we’ll take a look at Mag 7. stocks and their AI-related growth catalysts. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks in which hedge funds accumulate? The reason is simple: our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy picks 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 Corp Inc (NASDAQ:NVDA)
Number of hedge fund investors: 186
Aswath Damodoran has been skeptical about NVDA over the past few months, repeatedly saying the stock looks overvalued. In March, when he was asked about his previous predictions (which turned out to be wrong) about NVDA’s valuation, the professor said that he either “has no idea what I’m talking about” or it’s the market that just doesn’t understand.
Aswath Damodoran said at the time that while Nvidia was in the “driving seat” of the AI bandwagon, its path to profits won’t be as easy as the market assumes.
Oppenheimer’s Rick Schafer recently joined the NVIDIA Corp ( NASDAQ:NVDA ) chorus, raising the chipmaker’s price target to $150 from $110 after the stock split 10-1.
NVIDIA Corp ( NASDAQ:NVDA ) is one of the stocks that accounts for a large portion of the market’s total returns, thanks to its AI-fueled growth that seems to have no end in sight. Shares of NVIDIA Corp ( NASDAQ:NVDA ) have gained about 206% over the past year.
Barclays’ Tom O’Malley recently gave positive feedback on the stock, with a $145 price target and an overweight rating. The analyst noted a potential $25 billion opportunity from countries building their own AI capabilities. O’Malley expects NVIDIA Corp (NASDAQ:NVDA) earnings to be $3.62 per share in fiscal year 2026, while Wall Street analysts on average have $3.55 per share for NVIDIA Corp (NASDAQ:NVDA) earnings. for the year 2026.
NVIDIA Corp’s (NASDAQ:NVDA) latest product announcements and plans revealed at Computex 2024 show that NVIDIA Corp (NASDAQ:NVDA) has a lot more in its arsenal to fuel its growth engine. Analysts like NVIDIA Corp ( NASDAQ:NVDA ) are moving on to the new AI architecture known as Rubin ( R100 ) and think its powerful H100 and Blackwell chips easily beat 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 – the B200, GB200 and GB200 NVL72. All of these products provide growth catalysts for NVIDIA Corp ( NASDAQ:NVDA ) stock and justify the P/E multiple of 71, given NVIDIA Corp ( NASDAQ:NVDA )’s expected growth of over 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 P/E multiple of 35.74, which makes the stock’s valuation attractive given the growth catalysts it has .
Meridian Hedged Equity Fund stated the following about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading designer of graphics processing units (GPUs) for the gaming and professional markets, as well as system-on-a-chip units for the mobile computing and automotive markets. The company has experienced strong performance recently due to growing demand for its data center products, especially 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 in various end markets. The company’s GPUs have become an industry standard for training large linguistic models (LLM), 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 leadership in the AI accelerator market, with significant performance and total cost of ownership benefits over its predecessors. As the AI market continues to expand with increasing adoption across enterprises and sovereign nations, we expect Nvidia to maintain its dominance and experience steady growth in the data center business. Beyond data centers, Nvidia has also benefited from strong demand in its gaming business, which has rebounded after a period of inventory digestion in 2022. The company’s gaming GPUs have been well received, and its focus on the high-end market has supported the increase in average sales prices. Looking ahead, we expect the gaming market to remain healthy with continued growth potential. Nvidia also sees opportunities to diversify its business and enter new markets, such as automotive and robotics. We continued to hold our position on Nvidia.”
Overall, NVIDIA Corporation (NASDAQ:NVDA) is ranked #4 on Insider Monkey’s titled list Jim Cramer’s Latest Portfolio: The 10 Best Stocks in July. While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), our conviction lies in the belief that AI stocks have greater promise to deliver higher returns, and doing so within a shorter time frame. . If you’re looking for an AI stock that’s more promising than NVIDIA Corporation (NASDAQ:NVDA) but trades at less than 5 times its earnings, check out our report on Cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.