We recently published a list of 10 stocks that Jim Cramer thinks are worth watching, and in this article we’ll take a look at how NVIDIA Corporation (NASDAQ:NVDA) stands in relation to other stocks that Jim Cramer thinks are worth watching.
In a recent episode of Mad Money, Jim Cramer advised investors to refrain from selling stocks in anticipation of a rebound once the market decline was over. This strategy proved effective, with the average investor making a profit, as the Dow rose 484 points (1.16%) and the Nasdaq also rose 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week I advised everyone to hold off on selling everything and wait, trusting that we would see a recovery once the pain was over. The average investor took profits, with the Dow up 484 points or 1.16% and the Nasdaq also up 1.16%. While it may not be a full recovery, it shows that selling on Friday’s dip was not the best strategy.”
Last week was a tough one for cyclical and tech stocks, despite the August employment report showing modest growth and a downward revision in July. The recent data points to a balanced scenario that is neither too strong nor too weak, which seemed to be palatable for those expecting a rate cut from the Federal Reserve. However, Wall Street reacted negatively, with investors moving out of cyclical stocks and into recession-proof sectors such as consumer goods and pharmaceuticals. Industrial and semiconductor stocks were particularly affected.
Jim Cramer noted that recession-proof stocks such as pharmaceuticals, pharmaceutical wholesalers and medical equipment continued to perform well on Monday, but the trend is concerning because these stocks have been rallying so much that a correction may be coming soon.
“Recession-proof stocks such as pharmaceuticals, pharmaceutical wholesalers and medical devices continue to perform well, but the danger is that these stocks have seen rapid gains and may be due for a correction.”
According to Cramer, historically, when the Fed cuts interest rates, it’s a signal to shift investment strategies. With the Fed easing and a rate cut expected next week, Cramer suggests it’s time to rethink holding recession-proof stocks. Investors should look to more cyclical companies that could benefit from stimulus. Investing in cyclical stocks during a recession can be difficult, but these stocks could be attractive if you expect a positive impact from the Fed’s rate cut.
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“Historically, we know that when the Fed cuts rates, it’s time to shift focus. With the Fed leaning toward easing and a rate cut expected next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. Cyclical stocks are hard to buy during a downturn, but if you expect the Fed to give the economy a boost, they become a strong opportunity. It’s important to stay diversified, but be prepared to adjust if necessary.”
At Insider Monkey, we stick to stocks that hedge funds concentrate their investments in. The reason is simple: our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
Close-up of a colorful high-end graphics card plugged into a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Number of hedge fund investors: 179
Jim Cramer questioned whether artificial intelligence is still a hot topic given recent trading patterns. He noted that AI-related stocks, including NVIDIA Corporation (NASDAQ:NVDA), a major player in the field and a member of his investment club, have fallen nearly 14% over the past five sessions. The decline calls into question current investor interest in AI-related investments.
“Does anyone care about artificial intelligence anymore? It seems fair to ask, given the recent trading of AI stocks, including Nvidia, a key enabler of AI and fellow club member, with its shares down nearly 14% over the past five sessions.”
The positive outlook for NVIDIA Corporation (NASDAQ:NVDA) is supported by the company’s impressive financial performance and leadership in key areas such as artificial intelligence (AI) and data center. In the second quarter of fiscal 2025, NVIDIA Corporation (NASDAQ:NVDA) revenues surged 122% year over year to $30 billion, while net income grew 168% to $16.6 billion. The growth was primarily driven by data center revenues increasing 154% to $26.3 billion due to increased demand for NVIDIA Corporation’s (NASDAQ:NVDA) advanced Hopper GPUs used in AI applications.
NVIDIA Corporation’s (NASDAQ:NVDA) leadership in AI is further highlighted by the upcoming Blackwell architecture, which is expected to drive further revenue growth. The gaming division also performed well, with revenue increasing 16% to $2.9 billion, driven by the versatility of RTX GPUs used for both gaming and AI tasks. NVIDIA Corporation’s (NASDAQ:NVDA) commitment to returning value to shareholders is underscored by its $50 billion share repurchase program, signaling strong confidence in future growth.
In its Q2 2024 investor letter, Ithaka US Growth Strategy said the following about NVIDIA Corporation (NASDAQ:NVDA):
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the manufacture of high-performance graphics processing units (GPUs). The company targets four large and growing markets: gaming, professional visualization, data center and automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including data center acceleration, artificial intelligence (AI), machine learning and autonomous driving.”
The stock price rose this quarter for two reasons. First, it rose on high expectations surrounding further development of generative AI and the possibility that this will require large purchases of Nvidia’s products in the future. Second, Nvidia once again delivered better-than-expected(1) results, raising its second-quarter 2025 revenue guidance above market expectations, demonstrating the company’s advantage in building today’s accelerated computing infrastructure.”
Overall, NVDA ranks #2 on Jim Cramer’s list of “10 Stocks to Watch.” While we acknowledge NVDA’s potential, we believe there is plenty of potential for lower-profile AI stocks to deliver higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than those on our list and trade at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: The $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and NVIDIA Has “Become a Wasteland” According to Jim Cramer.
Disclosures: None. This article was originally published on Insider Monkey.
