Nvidia (US:NVDA) is very popular with the top portfolio managers Elite Companies tracks. But despite its amazing performance, it is not the world’s most popular smart-money technology play.
Based on Citywire’s unique and independently approved methodology for measuring smart-money backing, the chip designer ranks number 31 out of more than 6,000 companies that qualify for an Elite Companies rating.
There are actually 13 technology companies more popular with top investors (see table at the end of this article), although none of these has come close to the 197% total return Nvidia shares have managed over the last 12 months.
If the top stockpickers we follow have made the right calls, Nvidia shares could face more competition in the coming 12 months.
And not everyone is aNvidia fan.
Fidelity’s Global Technology fund, a behemoth managing nearly €20bn in assets, has not held the California-based chip giant for at least three years.
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US picks
One of the 13 technology stocks more popular than Nvidia, Qualcomm (US:QCOM), is also a US chip designer. Qualcomm is a leader in cutting-edge smartphone chips and could be set to benefit from the tsunami of AI investment Nvidia has helped unleash.
Qualcomm is hoping to be a key provider of chips for AI-enabled devices. Nvidia’s chips are used chiefly in data centres rather than phones, tablets andpersonal computers (PCs).
Qualcomm has ambitions to use the hardware overhauls needed to run AI on devices to become a leading player in PCs, a market it has long wanted to break into.
Five of Nvidia’s fellow Magnificent Seven members rank above it based on their level of smart-money backing. In order of popularity, these are Alphabet (US:GOOGL), Microsoft (US:MSFT), Meta (US:META), Apple (US:AAPL) and Amazon (US:AMZN).
Asian and European marvels
The most popular technology play globally for Elite Investors is Korean memory chip and smartphone goliath Samsung Electronics (KR:005930). It has struggled over recent years but could be set to bounce back should AI spending reinvigorate demand for memory and trigger a smartphone upgrade cycle.
Asia’sinformation technology services giants FPT (VN:FPT) and Infosys (IN:500209) also boast more Elite Investor interest than Nvidia, as do two of the region’s leading semiconductor manufacturing companies: Taiwan Semiconductor Manufacturing (TW:2330) and packaging and testing specialist ASE Technology (TW:3711).
The only European technology company ranking above Nvidia is Dutch semiconductor equipment maker ASML (NL:ASML).
ASML has clear leadership in supplying the mind-bogglingly complex etching machines vitalin making the world’s most advanced chips. It is also the only one of the 13 companies with a valuation approaching Nvidia’s.
At the other end of the valuation spectrum is Chinese e-commerce and cloud computing giant Alibaba (HK:9988).
Why is this smart-money favourite trading at just nine times forecast earnings? The reasons are plentiful. It faces challenges from state intervention, US restrictions to cutting-edge technology and disruptive competition from ‘factory gate to customer doorstep’ retailers, such as Shein and Temu.
Better than Nvidia?
Companies in the table below are ordered by popularity with the top managers Elite Companies tracks.
| Name | F’cst price to earnings | Return on invested capital | F’cst 2yr EPS CAGR |
|---|---|---|---|
| Samsung Elec. (KR:005930) | 13 | 4.1% | 45% |
| Alphabet (US:GOOGL) | 24 | 25% | 17% |
| TSMC (TW:2330) | 22 | 20% | 24% |
| Microsoft (US:MSFT) | 35 | 28% | 15% |
| Meta (US:META) | 25 | 23% | 19% |
| FPT (VN:FPT) | 25 | 25% | 24% |
| Apple (US:AAPL) | 32 | 59% | 10% |
| Infosys (IN:500209) | 25 | 30% | 7% |
| Amazon (US:AMZN) | 38 | 10% | 33% |
| Alibaba (HK:9988) | 9 | 6.7% | 5% |
| ASML (NL:ASML) | 40 | 51% | 30% |
| Qualcomm (US:QCOM) | 19 | 21% | 13% |
| ASE Tech. (TW:3711) | 16 | 7.4% | 31% |
| Nvidia (US:NVDA) | 41 | 70% | 43% |
Sources: Citywire / Morningstar, latest holdings data, and FactSet, as of 8 Jul 2024. Based on next 12 month forecasts. EPS = earnings per share. CAGR = compound annual growth rate
