Nvidia (NASDAQ: NVDA) has been the stock market star this year: the artificial intelligence (AI) chip specialist has wowed investors with triple-digit revenue growth and even faster profit growth as it powers the generative AI revolution.
No other stock in history has seen its market capitalization grow by trillions of dollars so quickly, and at one point NVIDIA surpassed Apple and Microsoft to become the world's most valuable company. So far this year, NVIDIA shares are up 160%, an impressive gain indeed.
But a few stocks have actually outperformed the tech giant this year. Read on to learn about three of them and whether they can continue to outperform Nvidia in the future.
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1. Kava Group
Cava Group (NYSE: CAVA) is one of the most impressive restaurant stocks to hit the market in recent years, perhaps since Chipotle Mexican Grill, and Panera Bread founder Ron Shaich was an early investor and, as chairman of the board, has helped lead the fast-casual chain to success.
Cava also has a Chipotle-like menu, but with a similarly minimalist, industrial store design to its Mediterranean offerings. The concept is clearly resonating with customers, according to the company's financial results: In the second quarter, Cava reported a 14.4% increase in same-store sales, driven by a 9.5% increase in traffic, suggesting the concept is catching on.
The company's average unit sales, or average annual sales per store, has grown to $2.7 billion, approaching Chipotle's $3.1 billion. Cava's restaurant-level profit margins are similarly impressive, at 26.5% in the most recent quarter, well ahead of Chipotle's 28.9%.
Cava's bottom line is also surging, with second-quarter net income tripling to $19.7 million. The chain is still small, with 341 stores, but it has a lot of room to grow. Cava shares are up 182% this year after last Friday's revenue surge.
2. Sweet Green
Another restaurant chain, Sweetgreen (NYSE:SG), has also seen strong growth this year. The fast-casual salad chain has seen its results soar thanks to solid growth and a low stock price since the start of the year.
Sweetgreen has taken a more circuitous path to its current levels than Hippo, as it went public at the peak of the pandemic bubble and then crashed like almost every other growth stock.
Since then, the salad joint has convinced investors and delivered both impressive growth and restaurant-level profits. The company also says it has deployed a robotic kitchen assistant, dubbed Infinite Kitchen, to speed up capacity and save on labor costs.
The story continues
Sweetgreen's revenue rose 21% to $184.6 million in the second quarter on a 9% increase in same-store sales. Sweetgreen's average unit price was $2.9 billion, in line with Chipotle's, and store-level profit margins improved to 22% from 20%.
The company is a leader in the fast-casual salad industry, currently operating about 225 locations with plenty of room to grow, and its Infinite Kitchen technology (an automated food preparation system) is another way the company differentiates itself from the competition.
So far this year, Sweetgreen's shares have risen 225%.
3. Carvana
Carvana (NYSE: CVNA) is one of the biggest stock market surprises in recent history. The online used-car retailer was once a booming business, but in 2022, it found itself on the brink of bankruptcy and forced to close down.
But aggressive cost-cutting and a stabilizing used-car market have helped Carvana recover, and its shares have continued to soar so far this year, up 194% so far this year.
Carvana has significantly reduced its inventory and restructured its debt, which has enabled it to achieve positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and generally accepted accounting principles (GAAP) net income.
Carvana also bounced back with increased vehicle sales and solid revenue growth, with second-quarter sales up 23%.
Online used-car sellers should also benefit from lower interest rates, which will spur demand from car buyers and make it easier for Carvana to refinance its debt and reduce its interest burden, which remains a major expense for the company and accounts for more than half of its operating profit.
Are Cava, Sweetgreen and Carvana worth buying?
All three of these stocks have posted strong gains this year, with Sweetgreen and Carvana showing stronger recovery than Cava.
Of the three, Cava looks the most attractive right now. Its execution and results have been nearly flawless since its IPO, and it seems well-positioned to follow in the footsteps of Chipotle's growth in the fast-casual sector.
Meanwhile, Carvana appears to be the riskiest stock because it still has a lot of debt and the used-car market can be cyclical, but lower interest rates should be a boon for the company.
Finally, Sweetgreen is another compelling growth story as a unique concept in the restaurant industry, and Infinite Kitchen could become a key driver of profitability as the company expands to more locations.
For investors comparing these stocks to Nvidia, it's important to understand that Nvidia's upside potential is probably quite limited at this point: Nvidia's market cap is over $3 trillion, and even a 50% rise from here would put its market cap at over $4.5 trillion, but no company has ever reached a $4 trillion market cap.
That doesn't mean it's impossible, but if you're looking for the next 5x or 10x growth stock, you'd be better off shifting your focus from Nvidia to smaller growth stocks like Cava, Sweetgreen, or Carvana.
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Jeremy Bowman owns shares of Carvana and Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Apple, Chipotle Mexican Grill, Microsoft, and Nvidia. The Motley Fool recommends Cava Group and Sweetgreen and recommends long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
These 3 Stocks Are Outperforming Nvidia This Year: Are They Better Buys Than the AI Leader? was originally published by The Motley Fool.
