We recently compiled a list of Jim Cramer’s 10 hottest stocks, and in this article we’ll take a look at how NVIDIA Corporation (NASDAQ:NVDA) ranks against the rest of Jim Cramer’s stocks.
On a recent episode of Mad Money, Jim Cramer talked about some of Wall Street’s biggest oversights this earnings season, especially on a day when the Dow fell 141 points and the Nasdaq rose 0.2%. Cramer cited misleading stories about the impact of GLP-1 drugs on food and beverage companies, reluctance to cut prices post-pandemic, skepticism about AI investments, and
Intel continues to dominate the technology world.
Cramer argues that if companies were more honest about their changing circumstances, they would appear more credible and their stock prices could rise, but by concealing important details, they could confuse investors and make them more likely to make wrong decisions.
“It would make things a lot easier for everyone if companies admitted their changed situation, but who wants to admit they’re wrong? Companies get credit and stock prices rise, only to suffer as investors try to figure out what’s actually going on and assume the worst instead of the best,” Cramer said.
Kramer emphasized how easy it is to be misled in an age of misinformation and stressed the need to recognize these gaps. According to Kramer, despite the fact that approximately 20 million Americans are reported to be using GLP-1 weight loss and diabetes drugs, food and beverage companies refuse to acknowledge any adverse effects of these drugs. They don’t even hint at them. Kramer argues that their denial of the effectiveness of GLP-1 drugs is a complete lie.
“We know that when you take GLP-1, it suppresses your appetite, so you eat a lot less and eat less snack foods. … These drugs are incredibly powerful. It would be crazy for them not to hurt snack food companies.”
Commenting on price increases, Cramer said most companies have not seen the need to lower prices despite the massive hikes that have occurred during the pandemic. He noted that airlines that have consistently underperformed have refused to lower fares and are acting as if the hikes never happened.
“There are countless airlines out there that are underperforming. They simply won’t lower their prices and act as if they never raised them in the first place.”
The same goes for hotels and entertainment venues, which have significantly increased prices during the pandemic and are resisting lowering them despite lower demand projections. Cramer also noted that many restaurants either insist that price increases haven’t affected sales or refuse to acknowledge the need to lower prices.
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“We’ve increased our prices significantly during the pandemic, and we’re not going to hold back on increasing prices much, even though expectations are now way down.”
In discussing AI, Cramer strongly disagrees with Wall Street’s argument that investing in AI is a waste of money. He points out that many believe that the big companies investing heavily in AI-related video chips aren’t seeing significant benefits and are simply investing to keep up with their competitors (see “The 33 Most Important AI Companies to Watch”).
“We keep hearing that big companies that are spending big bucks on video chips for AI aren’t getting any meaningful return on their investment. They’re only doing it to stop their competitors from getting an advantage. We keep hearing it. It’s ridiculous!”
Cramer also disputed the common perception that INTC is still a leader in its field. The company is poised to make a big comeback, especially in data centers, and denied claims that it has the chips to challenge its competitors’ dominance. Cramer noted that the company’s financials tell a different story, citing its decision to cut its dividend last year and suspend it for the rest of the year. Cramer said these actions are not indicative of dominance, and warned that despite what the company may claim, it is not the same semiconductor company it once was.
“We hear a lot about Intel making a huge comeback in the data center where they will overtake everyone else. They have an Nvidia killer there called GE-3. Intel will use their chips to take your money and further their dominance. It’s a pipe dream! Have you seen Intel’s balance sheet? Can you read it? Do you believe this is a company that cut its dividend last year and then suspended what’s left this year to establish dominance?! This is not the Intel of old, although we would like it to be. Despite Intel’s protests, I do not want to be an Intel partner.”
Close-up of a colorful high-end graphics card plugged into a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Number of hedge fund investors: 186
NVIDIA Corporation (NASDAQ:NVDA) is well positioned to benefit from the surging demand for AI, especially as more companies and researchers invest in AI development. The continued growth of AI training within data centers is the primary driver of NVIDIA Corporation (NASDAQ:NVDA) revenue.
AI technology is expected to make significant advances over the next decade, but current demand is already pointing to bright prospects for NVIDIA Corporation (NASDAQ:NVDA). UBS analysts expect NVIDIA Corporation (NASDAQ:NVDA) shares to rise 27% from their current price of $118, raising the company’s forward price-to-earnings multiple to 54 times, signaling strong confidence in NVIDIA’s future growth.
Jim Cramer highlights that NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Huang confidently stated that buying NVIDIA chips could quadruple your profits. He stresses that this is reality, not just speculation, and questions how much money anyone has actually made by betting against Huang’s predictions over the past few years.
“Nvidia’s Jensen Huang says you can get four times the money if you buy his chips – that’s a four-fold return. I think Meta will get it eventually. Other players will have to spend money to actually catch up. This is not a myth, it’s a reality. How much money have you ever made betting on Jensen Huang?”
Overall, NVDA ranks third on Jim Cramer’s stock picks list. While we acknowledge NVDA’s potential as an investment, we believe that less-obvious AI stocks have a good chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than NVDA but still trade for less than five times their earnings, check out our report on the cheapest AI stocks.
Read next: Analyst sees new $25 billion ‘opportunity’ in NVIDIA, Jim Cramer recommended these 10 stocks in June.
Disclosures: None. An earlier version of this article misspelled Jensen Huang’s name. This article was originally published on Insider Monkey.
