We recently published a list of Jim Cramer Is Talking About These 10 Stocks Amid the Global Selloff. As NVIDIA Corp (NASDAQ:NVDA) ranks third on the list, it deserves a deeper look.
Jim Cramer, on his latest show on CNBC, talked about Monday’s brutal market selloff and said days like these can make you “cry yourself to sleep.” Cramer said this “nasty” sale was expected.
“This is exactly what you would expect at this point in the rate cycle, the point at which the Fed is about to start cutting rates to shore up the economy. But the economy is in decline,” Cramer said.
Cramer said Monday’s selloff was “cruel enough” to make any investor wonder why they should stay in the market, but that’s exactly “what you have to do.” He believes the latest decline is a buying opportunity for long-term investors.
Jim Cramer said the sell-off began because money managers who were borrowing money from Japan to invest in US stocks were caught with their “pants down” when Japan raised interest rates. As a result, these funds were forced to sell their shares. He doesn’t think it’s possible to hit rock bottom yet “until we know these sellers have finished their negotiations.”
Cramer said another important reason investors were selling on Monday was the notion that the Fed is late in cutting rates. But Cramer said a 25 bps rate cut would not matter much and if Fed Chairman Jerome Powell sees there is a need for an urgent rate cut, he will do so.
“He has horse sense,” Cramer said.
Jim Cramer said there are no “safe havens” in technology, and while he reiterated his bullish view on some notable tech stocks, he advised investors to be prepared for short-term “pain” if they want to invest in technology.
“If you can’t take the pain, then get the hell out of it.”
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NVIDIA Corp (NASDAQ:NVDA)
Number of hedge fund investors: 186
Jim Cramer, on a more recent show, reiterated that NVIDIA Corp (NASDAQ:NVDA) is doing “amazing things” with generative AI and accelerated computing and that it has nothing to do with the Fed. Despite this, Cramer said the stock of NVIDIA Corp (NASDAQ:NVDA) “have become a wasteland”.
Cramer said he doesn’t see NVIDIA Corp’s (NASDAQ:NVDA) decline stopping here mainly because the company won’t benefit from upcoming rate cuts.
Cramer believes the market earnings estimate for NVIDIA Corp (NASDAQ:NVDA) is low and “maybe” the company could earn $4.59 next year, meaning it is trading at 23x earnings.
“I’m not selling the biggest growth stock of our generation” at 23 times earnings, Cramer said.
NVIDIA Corp (NASDAQ:NVDA) shares are falling amid valuation concerns. However, Morgan Stanley has again added the stock to its list of top picks. Analyst Joseph Moore said:
“Visibility will increase as demand moves from Hopper to Blackwell, as constraint shifts back to silicon; Delivery times for the H100 are short, but lead times for the H200 are already long, and Blackwell is expected to be even longer,” the company said.
However, the latest earnings from big tech companies have raised some concerns about NVIDIA Corp’s (NASDAQ:NVDA) future growth trajectory. The company’s major customers, including Meta Platforms and Alphabet, have indicated they may be building and spending too much on AI chips. NVIDIA Corp (NASDAQ:NVDA) is selling about 2 million of its GPUs annually based on 2023 data. As demand moderates and competitors increase their production, the company will not be able to sustain its current growth trajectory. growth.
Raymond James analyst Javed Mirza recently said in a report that NVDA has “triggered a mechanical sell signal” based on a moving average convergence/divergence indicator. In a technical analysis report, he stated that the stock is trading below the 50-day moving average and showing early signs of selling pressure. This, according to Mirza, shows that there is an imminent corrective phase lasting 1 to 3 months. He added that a sustained break below the 50-day moving average could lead to a decline to 94.94, representing a further 16.9% drop from current levels.
The rapid run and rise of NVIDIA Corp (NASDAQ:NVDA) has started to make some circles on Wall Street uncomfortable. New Street Research last month downgraded the stock from Buy to Neutral and set the stock’s price target at $135.
“We downgraded the stock to Neutral today, as the increase will only materialize in a bullish scenario, in which the outlook beyond 2025 increases materially, and we still do not have conviction about this scenario.” New Street analyst Pierre Ferragu said.
However, New Street recently upgraded the stock after the latest sell-off and set a $120 price target, saying:
“We consider the correction to be healthy overall, recognize some limited headwinds and tactical Nvidia-specific headwinds, but overall view the stock moves as an opportunity to gain more exposure.”
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 Investor Letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to lead the market and the portfolio, maintaining the best performance in the period, gaining 36.7%. Nvidia is a market leader in the design and sale of graphics processing units (GPU), which has recently benefited from insatiable demand for artificial intelligence (AI) models. The company currently holds 92% of the data center GPU market and has grown revenue, profits and free cash flow (“FCF”) by an astonishing 126%, 392% and 610%, respectively, in the last year. While we expect competition to increase, we think NVDA can continue to maintain superior market share. While many are concerned about reducing delay times, we believe the launch of the B100, which promises 2.5x better performance for just 25% more cost, later this year will create more shortages. With cutting-edge technology, a growing innovation cycle and strong cash generation, the company is well positioned for greater adoption of artificial intelligence (AI).
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks #3 on Insider Monkey’s list titled Jim Cramer Is Talking About These 10 Stocks Amid the Global Selloff. While we recognize the potential of NVIDIA Corp (NASDAQ:NVDA), our conviction lies in the belief that AI stocks are more promising to deliver higher returns, and to do so in a shorter time frame. If you’re looking for an AI stock that has more promise than NVDA but trades at less than 5 times earnings, check out our report on the cheapest AI stock.
READ NEXT: Analyst sees a new $25 billion “opportunity” for NVIDIA It is Jim Cramer is recommending these stocks.
Disclosure: None. This article was originally published on Insider Monkey.
/cdn.vox-cdn.com/uploads/chorus_asset/file/11447597/acastro_180529_1777_nvidia_0002.0.jpg?w=300&resize=300,300&ssl=1 "Nvidia reportedly delays its next AI chip due to design flaw")
