We recently compiled a list of the 10 Best Semiconductor Stocks to Buy for the AI Boom.In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other semiconductor stocks.
More than two years have passed since the proliferation of the disruptive Artificial Intelligence (AI) megatrend, symbolically marked by the launch of OpenAI’s revolutionary product – ChatGPT. Since then, the AI revolution has accelerated rapidly, with 2023 and 2024 seeing a surge in demand for advanced AI applications across industries. This transformation has driven companies to increasingly rely on robust data centers that can support the computational power required by the intelligent algorithms.
In tandem with the rise of AI, the data center sector has experienced substantial growth. The need for larger, more efficient, and scalable data storage and processing capabilities has created a boom in infrastructure investments. Data centers, which house the powerful servers needed for AI workloads, have become critical enablers of this technology's expansion. This increase in demand for data center capacity is a key factor that has propelled semiconductor stocks, as these centers rely heavily on cutting-edge semiconductors to deliver the speed, efficiency, and power necessary to process vast amounts of data in real time.
Our Methodology
We shortlisted 35 semiconductor stocks using the holdings of iShares' Semiconductor ETF. Then we merged these stocks with Insider Monkey's proprietary hedge fund holdings database and identified the 10 most popular hedge fund semiconductor stocks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
NVIDIA Corporation (NVDA): AI Leadership and Blackwell Growth Amid Challenges
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA) is a leading developer of GPUs, traditionally used to enhance computing experiences, particularly in PC gaming. Over time, GPUs have become critical for artificial intelligence applications, with NVDA providing both AI-focused GPUs and its CUDA software platform for AI model development and training. The company is also expanding its data center networking solutions, enabling GPUs to work together efficiently to handle complex workloads.
NVDA clearly had an explosive FY2024 as the stock price returned 146% in the last twelve months alone. While bears argue that the upside from accelerating GPU demand for data center applications has largely been realized and is priced in, NVIDIA Corporation (NASDAQ:NVDA) continues to tap into new markets, thus perpetually expanding its TAM and fueling growth. The company is partnering with IQVIA to develop custom AI models and agentic platforms for clinical trials using its proprietary AI foundry services and DGX Cloud capacity. It also introduced GenMol, a new foundation model for goal-directed molecular generation, as part of its BioNeMo platform for AI-driven drug discovery. Furthermore, NVDA is collaborating with the Arc Institute to develop large-scale foundation models for biology using NVIDIA DGX Cloud infrastructure and BioNeMo. A partnership with Illumina was announced to combine Illumina's sequencing platforms with NVIDIA's Clara toolset to expand genomics accessibility and utility. Another partnership with Mayo Clinic is set to accelerate AI-driven digital pathology using NVIDIA DGX Blackwell and applying Cosmos for multimodal vision to understand biology more deeply. The company is advancing physical AI capabilities through its Holoscan healthcare AI robot platform, Cosmos Nemotron vision language models, and Omniverse for creating physics-aware virtual worlds to train robots.
Management of NVIDIA Corporation (NASDAQ:NVDA) has thoroughly discussed its new healthcare opportunity during the 43rd Annual J.P. Morgan Healthcare Conference. Here is what they said:
“Now if you think about the $10 trillion industry that health care has become, a very large portion of that is in labs, hospitals, and operations. And we're still in a huge labor shortage, 10 million to 15 million to 20 million labor shortage. AI can help. AI is going to help through the delivery of AI agents who can be knowledge workers working on your behalf. They can be in the form of delivery robots, offloading nurses from delivering sheets to a different room. They're going to become all forms. And this digital intelligence is going to be built on AI factories, just as I described. Data comes in, models get built and refined, assembled into agents, and intelligence comes out.”
Overall NVDA ranks 1st on our list of the best semiconductor stocks to buy for the AI boom. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
