nvidia(NASDAQ: NVDA ) Artificial intelligence (AI) has been the foundation of the boom. Its graphics processing units power almost all advanced AI systems, and the company has a strong presence in adjacent markets such as AI networking equipment and software development tools.
However, billionaire David Tepper sold Nvidia in the third quarter and bought a surprising AI stock: Electric Utility. detail(NYSE: VST ). That was a bad word, but Tepper is a good case study for investors because his hedge fund Appaloosa has doubled returns. S&P 500(SNPINDEX: ^GSPC) In the last three years.
Significantly, Tepper sold only 65,000 shares of Nvidia during the quarter, reducing his position by just 9%. So it would be wrong to assume that he has lost faith in the semiconductor company. But Vistra accounted for 2.2% of its portfolio as of September 30, compared to just 1.1% for Nvidia.
Moreover, the trades described were made in the third quarter, which ended more than two months ago. Investors should re-evaluate Nvidia and Vistra before making any decisions.
The investment thesis for Nvidia focuses on its leadership in the data center Graphics processing unit (GPUs). The company accounts for 98% of data center GPUs by shipment volume, and those chips have become the industry standard in accelerating workloads such as Learning machine learning models and ongoing inference on artificial intelligence (AI) applications.
Importantly, Nvidia is more than a chipmaker. It is an accelerated computing company that manufactures complete data center systems with GPUs, CPUs, networking, and chip interconnects. The company also provides a litany of software libraries and pretrend models that streamline AI application development. That vertically integrated strategy has made Nvidia “the world’s de facto enabler of AI.” Susquehanna Analyst Christopher Rowland.
Nvidia reported strong financial results in the third quarter of fiscal 2025, which ended in October 2024, beating consensus estimates on the top and bottom lines. Revenue rose 94% to $35 billion amid strong demand for AI infrastructure, and non-GAAP (generally accepted accounting principles) earnings rose 103% to $0.81 per diluted share. The company expects 70% revenue growth (plus or minus double digits) in the fourth quarter.
Going forward, Wall Street estimates that Nvidia’s adjusted earnings will grow 52% annually through fiscal 2026, which ends in January 2026. This makes a present value of 53 times adjusted earnings seem quite reasonable.
Investors should feel confident about buying a short position in Nvidia today. Moreover, many analysts recommend buying the stock on a decline of a few percentage points. I think this is a sensible strategy.
Vistra is the largest competitive power producer in the US with approximately 41,000 megawatts (MW) of capacity across its portfolio of natural gas, coal, nuclear and solar power plants. Importantly, Vista also became the second-largest nuclear power company measured by capacity after the Energy Harbor acquisition earlier this year.
Vistra operates in every major wholesale electricity market, but has a strong presence in ERCOT (Texas) and PJM (Northeast). Demand for data center electricity in those regions is expected to grow fivefold over the next five years, according to Grid Strategies. The driving force behind that demand is the increasing proliferation of artificial intelligence infrastructure.
More broadly, US electricity demand is forecast to grow 2.4% annually through 2030, the fastest pace since the early years of the 21st century, and AI data centers are just one cause of that trend. Construction activity in West Texas and the reshoring of Permian Basin electrification are meaningful contributors to projected load growth.
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 identified industrial and manufacturing activity as a major contributor to robust growth. The company also raised its full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2024 and 2025, and introduced optimistic guidance for 2026.
Wall Street expects Vistra’s earnings to grow 24% annually through 2025. This makes a current valuation of 26.5 times consensus estimate earnings reasonable. Investors who want more exposure to the AI boom — especially outside the technology sector — should consider buying some shares today. Indeed, JP Morgan Chase Recently the Vistara was named “Top Pick” for 2025.
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JP Morgan Chase is an advertising partner of Motley Fool Money. Trevor Jenwine There are positions in Nvidia. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. Motley Fool has a Disclosure Policy.
