Nvidia(NASDAQ: NVDA) has been the foundation of the Artificial Intelligence (AI) boom. Its manufacturing units are capable of almost all high-end AI systems, and the company has a strong presence in adjacent markets such as AI communication tools and software development tools.
However, billionaire David Tepper sold Nvidia in the third quarter and bought an amazing AI asset: electronics. See(NYSE: VST). This was a mistake, but Tepper is a good lesson for investors because the hedge fund Appaloosa doubled the return on investment. The value of the S&P500(SNPINDEX: ^GSPC) in the last three years.
More importantly, Tepper only sold 65,000 shares of Nvidia during the quarter, reducing his position by just 9%. So it would be unfair to think that they have lost confidence in the semiconductor company. But Vistra accounted for 2.2% of its portfolio since Sept. 30, while Nvidia accounted for only 1.1%.
In addition, the sales described were made in the third quarter, which ended more than two months ago. Investors should review Nvidia and Vistra before making a decision.
The thesis of investment for Nvidia centers on its leadership in data center graphics processing units (GPUs). The company accounts for 98% of data center GPUs by shipping volume, and the chips have become the industry standard for accelerating workloads such as machine learning machine learning models and applying knowledge to Artificial Intelligence (AI) applications.
Most importantly, Nvidia is more than just a chip maker. It is a leading computing company that manufactures all data center systems that include GPUs, CPUs, networking, and chip interconnects. The company also offers a series of software libraries and training models that support AI software development. This integrated approach has made Nvidia a “global AI enabler,” according to Susquehanna expert Christopher Rolland.
Nvidia reported excellent financial results in the third quarter of fiscal 2025, which ended in October 2024, beating consensus estimates above and below. Revenue rose 94% to $35 billion on strong demand for AI infrastructure, and non-GAAP (standardized accounting) earnings rose 103% to $0.81 per diluted share. The company expects revenue growth of 70% (plus or minus two points) in the fourth quarter.
Going forward, Wall Street estimates that Nvidia’s adjusted earnings will increase by 52% per year through fiscal 2026, which ends in January 2026. This makes the current figure of 53 adjusted times look good.
Investors should feel confident in buying a small position in Nvidia today. In addition, several experts recommend buying stocks on low percentage dips. I think it’s a smart move.
Vistra is the largest electricity producer in the US, with approximately 41,000 megawatts (MW) of capacity across its portfolio of natural gas, coal, nuclear, and solar power. Importantly, Vistra also became the second largest nuclear power company as measured by energy after acquiring Energy Harbor earlier this year.
Vistra operates in every major power market, but has power in ERCOT (Texas) and PJM (Northeast). The demand for data center electricity in these regions is expected to increase fivefold in the next five years, according to Grid Strategies. What drives this demand is the increasing number of smart devices being developed.
More specifically, US electricity demand is expected to grow at 2.4% per year until 2030, the fastest pace since the early years of the 21st century, and the AI data center is just one reason for that. Renewal of production and investment activities in the Permian Basin in West Texas is a key factor in the expansion of production.
Vistra reported encouraging financial results in the third quarter. Revenue rose 53% to $6.2 billion, and GAAP earnings rose 320% to $5.25 per diluted share. Management cited industrial and manufacturing jobs as the main contributors to the high growth. The company also raised its full-year before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2024 and 2025, and introduced guidance for 2026.
Wall Street expects Vistra’s earnings to grow 24% annually through 2025. That consensus expectation makes the current valuation of 26.5 times reasonable. Investors who want more exposure to the AI boom — especially from outside the tech sector — should consider buying a few shares today. Indeed, JPMorgan Chase recently called Vistra a “top pick” for 2025.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine holds positions at Nvidia. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. The Motley Fool has disclosure process.
