Is NVIDIA (NVDA) the Top Stock to Buy According to Jericho Capital Asset Management?

In the ever-evolving landscape of the stock market, one name that has consistently captured the attention of investors is nvidia (NVDA). As of March 31, 2025, NVIDIA's stock has experienced a significant sell-off, presenting a compelling buying opportunity for patient investors. But is NVIDIA truly the top stock to buy, according to Jericho Capital Asset Management? Let's dive into the data and explore the factors that make NVIDIA a standout investment.



NVIDIA's current valuation is notably lower than its recent highs, which presents a compelling opportunity for potential investors. As of March 31, 2025, NVIDIA's stock is down over 12% year to date, pushing its forward price-to-earnings (P/E) ratio down to just 26. This valuation is less expensive than many of its big tech peers, such as Apple and Microsoft, which both fetch forward P/Es over 29, and even Walmart, which has a forward P/E of 32.5. This discrepancy suggests that NVIDIA's stock is currently undervalued relative to its peers, despite its leading position in the AI and GPU markets.

Historically, NVIDIA has shown remarkable growth. Over the last year, its diluted earnings per share (EPS) is up 72%, and over the last three years, revenue is up over 340%, with earnings up over 680%. This growth trajectory, while impressive, is expected to slow as the company becomes larger. However, even with this expected slowdown, NVIDIA's forward P/E ratio of 26 is relatively low, indicating that the market may be overreacting to near-term concerns.

The implications for potential investors are significant. NVIDIA's low valuation prices in some of the risks associated with a potential global economic slowdown or reduced spending by its customers. However, given NVIDIA's strong balance sheet and its ability to sustain high margins, the company is well-positioned to continue investing in its long-term growth plans. This makes NVIDIA a foundational AI stock that investors can build a portfolio around, especially at its current valuation.

Additionally, NVIDIA's valuation is considered reasonable by high-profile investors like Brad Gerstner, the CEO of Altimeter Capital. Gerstner views NVIDIA as "the most important company in computing today" and has made it the largest holding of his hedge fund. He believes that NVIDIA's valuation is justified given its growth potential and the significant capital expenditures for generative AI. This endorsement from a seasoned investor further supports the idea that NVIDIA's current valuation is attractive for potential investors.



NVIDIA's growth in the AI and GPU markets is driven by several key factors. Firstly, NVIDIA's leadership in AI and GPU technology has positioned it as a market leader, with applications spanning gaming, data centers, and automotive technologies. This leadership is evident in the company's impressive financial performance, with revenue up over 340% and earnings up over 680% in the last three years. This growth is sustained by the increasing demand for data-intensive AI applications, which in turn drives the need for AI-capable data centers and advanced AI infrastructure.

Secondly, NVIDIA's ability to maintain high margins and brush off competition has been a significant factor in its growth. The company has an impeccable balance sheet, with more cash, cash equivalents, and marketable securities than long-term debt. This financial strength allows NVIDIA to invest heavily in research and development, ensuring it can continue to innovate and take market share even during a downturn.

Thirdly, the company's diversification into other industries, such as cloud computing data centers and video game consoles, has also contributed to its growth. This diversification reduces its reliance on any single market and provides additional revenue streams.

The sustainability of these trends in the long term is supported by several factors. Firstly, the increasing demand for AI technologies is expected to continue, with companies investing about $1 trillion in AI over the next four years. This demand will drive the need for NVIDIA's AI chips and GPUs.

Secondly, NVIDIA's strong financial position and commitment to innovation ensure it can continue to develop new products and technologies. This is evident in the company's plans for new products like Blackwell Ultra, which is expected to drive future growth.

Thirdly, the company's diversification into other industries provides a buffer against market fluctuations in any single industry. This diversification, combined with NVIDIA's strong financial position and commitment to innovation, suggests that its growth trends are sustainable in the long term.

In conclusion, NVIDIA's current valuation, coupled with its strong financial position and commitment to innovation, makes it a compelling investment opportunity. While the market may be overreacting to near-term concerns, NVIDIA's long-term growth prospects remain robust. As such, Jericho Capital Asset Management believes that NVIDIA is the top stock to buy, especially for investors looking to capitalize on the growing demand for AI technologies.

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