We recently published a list of these 10 stocks Jim Cramer is talking about amid a global sell-off, and NVIDIA Corp (NASDAQ:NVDA) ranks third on the list, so it’s worth taking a closer look.
Jim Cramer spoke about Monday’s intense market sell-off on CNBC’s Latest Show, saying that on days like this, you might “cry yourself to sleep.” Cramer said the “nasty” sell-off was expected.
“This is exactly what you’d expect at this point in the interest rate cycle. The Fed is about to start cutting rates to stimulate the economy, but the economy is declining,” Cramer said.
Cramer said Monday’s sell-off was “bad enough” that it makes investors wonder why they should stay in the market, which is exactly what they should do. He sees the recent sell-off as a buying opportunity for long-term investors.
Jim Cramer said the selloff began because money managers who had borrowed from Japan to invest in U.S. stocks were “caught off guard” when Japan raised interest rates. As a result, these funds were forced to sell stocks. Cramer believes the bottom of the decline is still too early to predict “until these sellers have finished unwinding their trades.”
Cramer said another big reason investors sold off on Monday was the belief that the Fed was late in cutting interest rates. But Cramer said a 25 basis point cut wouldn’t have much of an impact and that if Fed Chairman Jerome Powell decides an emergency rate cut is needed, he will do so.
“He has common sense,” Kramer said.
Jim Cramer said there are no “safe havens” in the tech sector, and while he reiterated his bullish view on some prominent tech stocks, he advised investors to prepare for “pain” in the short term if they want to invest in the sector.
“If you can’t stand the pain, then get out of there.”
For this article, we watched some of Jim Cramer’s latest shows and picked 10 key stocks he talked about. For each stock, we included the number of hedge fund investors. Why are we interested in stocks that hedge funds are flocking to? The reason is simple: our research shows that you can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy, which selects 14 small and large stocks each quarter, has returned 275% since May 2014 and outperformed the benchmark by 150 percentage points (more details here).
NVIDIA (NASDAQ:NVDA)
Number of hedge fund investors: 186
On his latest show, Jim Cramer reiterated that NVIDIA Corp (NASDAQ:NVDA) is doing “great things” with generative AI and accelerated computing and has nothing to do with the Fed. Despite this, Cramer said NVIDIA Corp (NASDAQ:NVDA) stock has “become a wasteland.”
The story continues
Cramer said he doesn’t think NVIDIA Corp’s (NASDAQ:NVDA) decline will stop here, mainly because the company isn’t benefiting from upcoming interest rate cuts.
Cramer believes the market has low earnings expectations for NVIDIA Corp (NASDAQ:NVDA) and that the company “probably” can expect earnings of $4.59 next year, meaning it would trade at 23 times earnings.
“I’m not going to sell the biggest growth stock of a generation at 23 times earnings,” Cramer said.
NVIDIA Corp (NASDAQ:NVDA) shares are trending lower due to concerns about valuation, but Morgan Stanley has added the stock back to its top picks list. Analyst Joseph Moore said:
“Visibility will actually increase as demand shifts from Hopper to Blackwell and constraints shift back to silicon. H100 lead times are short, but H200 lead times are already long and should become even longer for Blackwell,” the company said.
However, recent earnings from the tech giant have raised concerns about NVIDIA Corp’s (NASDAQ:NVDA) future growth trajectory. The company’s major customers, including Meta Platforms and Alphabet, suggest it may be overbuilding and overspending on AI chips. NVIDIA Corp (NASDAQ:NVDA) sells about 2 million GPUs per year based on 2023 data. If demand eases and competitors increase production, the company will not be able to maintain its current growth trajectory.
Raymond James analyst Javed Mirza said in a report that NVDA recently “triggered a mechanical sell signal” based on the moving average convergence/divergence indicator. In a technical analysis report, he noted that the stock is trading below its 50-day moving average, showing early signs of selling pressure. This indicates that a consolidation phase that could last one to three months is on the way, according to Mirza. He further added that a sustained break below the 50-day moving average could lead to a drop to 94.94, potentially down another 16.9% from current levels.
NVIDIA Corp’s (NASDAQ:NVDA) rapid growth and soaring valuation have some on Wall Street worried. New Street Research downgraded the stock to “neutral” from “buy” last month, setting a price target of $135.
“Today, we have downgraded the stock to neutral as the upside potential only materializes in a bull scenario of significantly expanding outlook beyond 2025, which we are not yet convinced will happen,” said New Street analyst Pierre Ferrague.
However, New Street upgraded the stock following the recent offering, setting a target price of $120 and saying:
“We believe the correction is healthy overall and recognize limited, tactical headwinds specific to Nvidia, but overall see the stock price movement as an opportunity to gain more exposure.”
In its Q2 2024 investor letter, Patient Capital Opportunity Equity Strategy said the following about NVIDIA Corporation (NASDAQ:NVDA):
“NVIDIA Corporation (NASDAQ:NVDA) continues to lead both its market and portfolio, maintaining its position as the top performer with growth of 36.7% during the period. NVIDIA is the market leader in the design and sale of graphics processing units (GPUs) and has recently benefited from the insatiable demand for artificial intelligence (AI) models. The company currently holds 92% market share of data center GPUs and has seen its revenue, profits and free cash flow (FCF) grow by an astounding 126%, 392% and 610%, respectively, over the past year. While we expect increased competition, we believe NVDA can continue to maintain its leading market share. While many are concerned about shortening backlog periods, we expect further shortages with the release of the B100 later this year, which promises 2.5 times the performance at only 25% increased cost. With cutting-edge technology, expanding innovation cycles and strong cash generation, the company is well positioned to drive artificial intelligence (AI) models. “We are well positioned to expand our adoption of
Overall, NVIDIA Corp (NASDAQ:NVDA) ranks third on Insider Monkey’s list of “10 Stocks Jim Cramer Will Talk About Amid Global Sell-off.” While we acknowledge the potential of NVIDIA Corp (NASDAQ:NVDA), we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks with more promise than NVDA but trading at less than 5x stock price, check out our report on the cheapest AI stocks.
Read next: Analysts see a new $25 billion “opportunity” for NVIDIA, and Jim Cramer recommends these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
