We recently published a list of the 7 Best AI Value Stocks that are “money-making machines” according to New York University’s Aswath Damodaran, and NVIDIA Corporation (NASDAQ:NVDA) ranked #4 on the list, so it’s worth taking a closer look.
Aswath Damodaran is a professor of finance at New York University’s Stern School of Business. His views on the economy and stock valuation have garnered considerable attention from analysts. In a recent interview with CNBC, Damodaran said that the Magnificent Seven stocks have become “value stocks for investors who care about earnings and cash flow.”
“Over the past year and a half, these seven companies alone have added $8.8 trillion to their market capitalization. For reference, the second largest market, China, has a market capitalization of $12.1 trillion. These seven companies alone have added more market capitalization than the combined market capitalizations of the German, French and Swiss markets.”
Damodaran’s comments are significant because he has repeatedly said in the past that big tech companies are overvalued or undervalued. In September, he told CNBC that if you look at any list of the top tech stocks, “they’re more likely to be overvalued than they are undervalued.”
But in a recent interview, Damodaran said that before “dismissing” Mag. 7 shares as “risky technology companies,” people should keep in mind that “these are money-making machines in this market.”
But when asked if he thought we were in some kind of “danger zone,” the professor said we were in the danger zone not just for these seven stocks but for the market as a whole.
In this article, we’ll look at Mag 7 stocks and their AI-related growth drivers. For each stock, we’ve included the number of hedge fund investors. Why would you care about stocks that hedge funds are flocking to? The reason is simple: our research shows that by mimicking the top picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small and large stocks each quarter, and has returned 275% since May 2014, beating its benchmark by 150 percentage points (more here).
Is NVIDIA Corporation (NASDAQ:NVDA) the best AI value stock that’s a “money-making machine,” according to NYU’s Aswath Damodaran?
NVIDIA Corp Inc. (NASDAQ:NVDA)
Number of hedge fund investors: 186
Professor Aswath Damodran has been skeptical of NVDA in recent months, repeatedly saying he believes the company’s stock is overvalued. When asked in March about his previous predictions about NVDA’s valuation (which were wrong), the professor said he either “has no idea what he’s talking about” or the market just doesn’t get it.
At the time, Aswath Damodran said Nvidia was a “driving force” in the AI boom, but the path to profitability might not be as easy as the market assumed.
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Oppenheimer’s Rick Schafer recently joined the NVIDIA Corp (NASDAQ:NVDA) chorus, raising his price target on the chipmaker to $150 from $110 following its 1-for-10 stock split.
NVIDIA Corp (NASDAQ:NVDA) is one of the stocks that’s accounting for a big chunk of the overall market return, thanks to an AI-fueled stock rally that shows no end in sight. NVIDIA Corp (NASDAQ:NVDA) shares have risen about 206% over the past year.
Recently, Tom O’Malley of Barclays made some bullish comments about the stock, assigning it a $145 price target and an overweight rating. The analyst noted a potential $25 billion opportunity from countries working to build AI capabilities. O’Malley expects NVIDIA Corp (NASDAQ:NVDA) to earn $3.62 per share in fiscal 2026, while Wall Street analysts, on average, expect NVIDIA Corp (NASDAQ:NVDA) to earn $3.55 per share in fiscal 2026.
NVIDIA Corp’s (NASDAQ:NVDA) latest product announcements and plans at Computex 2024 show the company has far more in its arsenal to bolster its growth engine. Analysts believe NVIDIA Corp’s (NASDAQ:NVDA) move to a new AI architecture known as Rubin (R100) will see its powerful H100 and Blackwell chips easily trump competitors.
NVIDIA Corp (NASDAQ:NVDA) will start shipping the H200 later this year. At the GTC conference, NVIDIA Corp (NASDAQ:NVDA) announced three accelerators: B200, GB200, and GB200 NVL72. All these products will be growth catalysts for NVIDIA Corp (NASDAQ:NVDA) shares, justifying a P/E multiple of 71, given that the company is expected to grow by over 100% this year and 32% next year. Based on Wall Street’s 2026 EPS forecasts, NVIDIA Corp (NASDAQ:NVDA) is trading at a forward P/E multiple of 35.74, making the stock valuation attractive given the company’s growth catalysts.
Meridian Hedged Equity Fund said 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-chip units for the mobile computing and automotive markets. The company has been performing well recently, due to the surge in demand for its data center products, especially those related to artificial intelligence. A major driver of NVIDIA’s recent success has been the increasing adoption of GPU accelerators for AI training and inference across various end markets. The company’s GPUs have become the industry standard for training large language models (LLMs), and networking solutions such as NVLink and InfiniBand are essential to maximize the performance of AI systems. NVIDIA’s latest Blackwell GPU platform offers significant performance and total cost of ownership advantages over previous products and is expected to further extend its lead in the AI accelerator market. As the AI market continues to see increased adoption among enterprises and sovereign nations, NVIDIA is expected to maintain its dominance and achieve sustained growth in its data center business.” Beyond data centers, NVIDIA is also benefiting from robust demand in its gaming business, which has recovered following a period of inventory run-off in 2022. The company’s gaming GPUs have been well-received, and its focus on the high-end market has supported rising average selling prices. Going forward, we expect the gaming market to remain healthy and continue to offer growth potential. NVIDIA also sees opportunities to diversify its business and expand into new markets such as automotive and robotics. We continued to maintain our position in NVIDIA.
Overall, NVIDIA Corporation (NASDAQ:NVDA) ranks #4 on Insider Monkey’s “Jim Cramer’s Latest Portfolio: Top 10 Stocks for July” list. While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks with more promise than NVIDIA Corporation (NASDAQ:NVDA) but with a price tag below 5x, check out our report on the cheapest AI stocks.
Read next: Analysts see a new $25 billion “opportunity” for NVIDIA, and Jim Cramer recommends these stocks.
Disclosures: None. This article was originally published on Insider Monkey.