Bridgewater Associates, the renowned hedge fund led by investor Ray Dalio, has significantly increased its position in Nvidia stock, making it one of their largest bets. The hedge fund has more than doubled its stake in the company, now owning around 7 million shares worth over $600 million. Nvidia, a leading player in the global artificial intelligence (AI) revolution, has seen its stock price surge in recent years, attracting the attention of investors like Bridgewater.
Nvidia’s stock has experienced remarkable growth, nearly tripling in value over the past 12 months and doubling roughly every 12 months over the past five years. This impressive performance is backed by strong fundamentals, with revenue more than doubling and earnings per share growing by over 600% in the last fiscal year.
The company’s success can be attributed to its central role in the AI industry. Nvidia’s graphics processing units (GPUs) have become highly sought-after chips by developers worldwide, making it a significant player in the AI market. The increasing demand for AI services has propelled Nvidia’s earnings, as the market requires a continuous supply of GPUs.
While Nvidia is involved in other end markets, its future largely depends on the trajectory of AI spending and its ability to produce attractive components for the industry. In 2022, gaming GPUs accounted for nearly half of Nvidia’s revenue, but data center GPUs, which power AI applications globally, now make up 87% of sales. Bridgewater’s investment in Nvidia is therefore a clear bet on the growth of AI and the company’s ability to maintain its market-leading position.
Market estimates suggest that AI chip spending will grow by 33% this year, further fueling Bridgewater’s confidence in Nvidia’s potential. However, there is growing competition in the AI chip market, and Nvidia’s CEO, Jensen Huang, has expressed concerns about retaining the company’s edge. Despite this, Nvidia currently holds a significant market share, ranging from 70% to 95% for AI accelerators.
Investors considering Nvidia should be aware of the stock’s high price tag, with a market capitalization of $3.1 trillion and a valuation multiple of 40 times sales. Additionally, the company’s long-term ability to meet the evolving demand for critical components like chips in the AI industry should be carefully evaluated.