We recently compiled a list of the 10 best-performing NASDAQ stocks of 2024. In this article, we’ll take a look at how NVIDIA Corp. (NASDAQ:NVDA) stacks up against other top-performing NASDAQ stocks.
Year-end market forecast
The Fed’s recent interest rate cuts have led to a significant outperformance in the tech sector, indicating widespread positive sentiment among investors. Tech stocks are thriving in this low interest rate environment, contributing to the broader market rally. The strength in small-cap stocks and cyclical sectors was evident even before the cut, suggesting increased market confidence. Analysts expect growth to continue as advances in AI continue to be a key theme influencing investor behavior.
A rate cut while markets are at record highs raises important questions about potential volatility. Historically, markets have shown resilience, often continuing to rise even when interest rates are cut near market peaks. This suggests that much of the current optimism may already be reflected in the stock price. Recent rate cuts are generally seen as a preventative measure rather than a direct response to the economic downturn, and could further boost consumer confidence and spending.
Toward the end of September, Leian Mitrione, investment management partner at the Callan Family Office, appeared in an interview highlighting key market developments following the Fed’s bigger-than-expected interest rate cuts. We discussed this in detail in our article on 7 Cheap Technology Stocks to Buy Now. Below is a short excerpt.
“… Mr. Mitrione emphasized that the market has responded favorably to lower interest rates, particularly benefiting the high-tech sector. … Mr. Mitrione, pointing to the chart, said that the market has responded favorably to lower interest rates, benefiting the high-tech sector in particular. It is unusual for interest rates to be cut at a time when prices are at such high levels, and there is a possibility of future volatility.Historically, even when interest rates are cut near a market peak, stock prices continue to rise. Much of this positive sentiment is priced in by advance signs of a rate cut, he said, explaining that the economy remains strong and rate cuts act as a preventive measure rather than a response to an economic downturn. This supportive environment is likely to increase consumer confidence and consumption, further improving market performance.”
On September 28, DataTrek Research co-founder Nick Colas gave an interview to CNBC to talk about the trading day and emphasize that the rally in tech stocks will have to wait until the end of the year. At the end of September, the S&P 500 was up an impressive 20% year-to-date. Given this performance, market participants have begun to reconsider their strategies following the first Fed rate cut. Nick Colas said one of the most encouraging aspects of September was that the market did not experience the declines typically expected in a month known for high volatility. Rather, the S&P is up 1.6% so far in September, showing resilience despite some initial volatility, and given September’s historically turbulent reputation, this Particularly noteworthy.
As Mr. Colas pointed out, positive indicators are emerging on the macroeconomic front. The Atlanta Fed’s GDPNow model raised its third-quarter growth forecast to 3.1%, suggesting the economy is performing well. Furthermore, reflecting strong consumer activity, gasoline demand increased by 6% compared to the previous year. The number of new jobless claims reported recently has also remained steady and is below the average for the past three years. These data points support the mid-cycle strategy adopted by DataTrek and suggest that the economy continues to develop without major cracks or fissures in its foundations.
Despite these positive trends, questions remain as to whether the market can maintain its momentum without new positive catalysts. Collas noted that historically, price-to-earnings ratios and stock prices tend to rise together, unless there are major negative factors that impede economic recovery. This correlation indicates that investor confidence is intact and likely to persist through the remainder of the year. Additionally, there is hope for a possible old Santa Claus rally in December as the market approaches the traditionally strong post-election month.
However, with the volatility index rising at around 17, investors are likely to remain cautious, especially with geopolitical tensions looming as elections approach. Over the past two years, the NASDAQ 100 has risen approximately 67%, marking a significant recovery from its October lows two years ago. This performance is significantly higher than the historical average return of approximately 25%. Colas emphasized that while such returns are impressive, they do not yet indicate speculative excess. Historically, when the Nasdaq doubles in two years, it’s a sign of potential trouble for investors.
Looking further back, Colas noted that the Nasdaq 100 has only risen about 20% in three years since its pre-bear market peak in November 2021. This suggests that there may still be room for growth compared to previous bubbles, where returns were more pronounced within shorter time periods.
There has been a recent rotation away from tech stocks, with cyclical sectors and financial stocks performing well. Collas believes this trend is likely to continue for some time, with a potential resurgence in tech stocks in November and December as the year draws to a close. Investors currently appear to be favoring cyclical sectors, which offer more immediate upside opportunities.
Although there are challenges ahead, current economic indicators suggest a solid environment for continued equity growth as long as investor confidence remains high and no significant negative factors emerge that impede progress. Despite the recent move away from tech stocks, the market remains resilient, with a potential tech comeback as we approach the end of the year, and a bullish outlook for both tech stocks and the Nasdaq in the coming months. The foundation for it to stand is in place.
When optimism about economic conditions and technological advances increases, tech stocks typically perform better and the Nasdaq also rises.
methodology
We used a stock screener to look for companies listed on the Nasdaq that trade in excess of $10 billion. We then selected the top 10 Nasdaq stocks that have performed the best year-to-date and are the most popular among elite hedge funds. Stocks are ranked by year-to-date performance.
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A close-up view of a colorful high-end graphics card connected to a gaming computer.
NVIDIA (NASDAQ:NVDA)
Year-to-date performance as of October 2nd: 136.26%
Number of hedge fund holders: 179
NVIDIA Corp. (NASDAQ:NVDA) is a leading semiconductor company that designs and manufactures GPUs for the gaming, data center, and professional visualization markets. Its GPUs are widely used to render graphics, accelerate AI applications, and power HPC workloads. The company is also expanding into other areas such as autonomous driving, robotics, and virtual reality.
The company holds about 80% of the global market share for GPU semiconductor chips. In Q2 FY25, the company achieved an impressive year-on-year revenue growth of 122.40%. Data center revenue increased 54% year-over-year, driven by strong demand for NVIDIA Hopper, GPU computing, and networking platforms. Cloud service providers accounted for approximately 45% of data center revenue.
Collaboration with healthcare institutions and growing demand for AI-powered diagnostic solutions are fueling this strong financial performance. In late August, management also approved a $50 billion stock repurchase program.
On September 25, NetApp announced new AI-powered data solutions powered by NVIDIA technology to power its unified storage operating system and benefit thousands of businesses. xAI Colossal, launched by Elon Musk, is powered by 100,000 NVIDIA H100 GPUs. Colossal is expected to expand with H200 GPUs and potentially Blackwell chips. Despite challenges with product launches and GPU pricing, NVIDIA’s focus on AI monetization and sustainability positions it for long-term growth.
CUDA software provides a competitive edge, but the company’s future depends on continued innovation and effective AI monetization. CUDA (Compute Unified Device Architecture) is a parallel computing platform and API that allows developers to harness the power of GPUs for general-purpose processing. Market analysts expect a shift towards robotics for the company’s growth. Management expects AI sales to be in the low double digits this year.
Columbia Contrarian Core Fund said the following about NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 Investor Letter:
NVIDIA Corporation (NASDAQ:NVDA) – NVIDIA continued its rally after reporting first-quarter results in May that featured record revenue growth of 262% year-over-year. On June 10, the company’s stock began trading on a split-adjusted basis following a 10-for-1 forward stock split, making it easier for both employees and investors to own the stock. Just a week later, the company officially surpassed Microsoft in market capitalization, making it the most valuable publicly traded company (though it would relinquish that title shortly thereafter). While other companies stand to benefit from artificial intelligence (AI) trends this year, NVIDIA stands out as the undisputed leader in this space, and its position is unlikely to be challenged for years to come. It’s low. NVIDIA continues to see very strong demand, and the recent introduction of Blackwell systems looks to be an exciting next phase of growth for NVIDIA stock. ”
Overall, NVDA ranks #5 on our list of Nasdaq’s best-performing stocks to buy. While we appreciate NVDA’s potential as an investment, we also believe that AI stocks have great potential for high returns in the short term. If you’re looking for AI stocks with more promise than NVDA, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: 15 humanoid robot stocks to buy, according to Morgan Stanley and Jim Cramer, says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article was originally published on Insider Monkey.
