We recently compiled a list of the Jim Cramer’s 10 Handpicked Stocks to Watch. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against Jim Cramer’s other handpicked stocks.
In a recent episode of Mad Money, Jim Cramer expressed concern that there’s too much negativity in the market despite recent movements. He pointed out that while the Dow gained 38 points on Wednesday, the S&P fell 1.16%, and the NASDAQ dropped 3%, people seemed overly focused on what was going wrong. Although he’s not calling it a market bottom, he suggests it’s worth paying attention to what’s going right.
“On a day when the Dow inched up 38 points, the S&P dipped 1.16%, and the NASDAQ declined 3%, I’m willing to declare that there’s too much doom and gloom out there. Look, I’m not trying to call a bottom, let’s make that crystal clear, but I think it’s worth taking a hard look at what’s actually going right—not just what’s going wrong.”
Cramer emphasized that even though the market has been strong this year, heading into a historically tough election season and the worst month of the year means it’s not the time to declare everything is fine. He noted that according to his trusted S&P oscillator, which measures overbought or oversold conditions, the market isn’t oversold yet, so it’s risky to go all-in.
“Sure, the market’s up a lot this year as we head into a tricky election period and historically the worst month of the year. So, only a fool would ring the all-clear bell. Plus, we aren’t even oversold yet—at least not according to the S&P oscillator I swear by, which gauges whether there’s too much buying or selling compared to normal times. You don’t go all-in when the market is overbought like it is now; that rarely works.”
Cramer also countered the idea that a recession is inevitable due to the Federal Reserve’s struggle to control the economy. He agreed the economy is slowing, which is why consumer packaged goods and utility stocks are rallying while more sensitive sectors are struggling.
“At the risk of sounding too bullish, let me refute some of the biggest and baddest stories out there. First, let’s tackle the popular narrative that the economy is slowing at a faster pace than the Federal Reserve can control, leading to an inevitable recession. That’s why consumer packaged goods stocks and utilities are rallying while economically sensitive stocks have been crushed. I won’t deny that the economy is weakening.”
However, he stressed that a Fed rate cut is meant to counter economic weakness, not strength, and hoping for a rate cut while ignoring the downturn is unrealistic. He added that if the upcoming labor report is weak, recession-proof stocks may surge, but if it’s strong, hopes for a rate cut will fade.
“But let’s be realistic: You can’t hope for a Fed rate cut without acknowledging that there’s going to be some economic fallout. The Fed doesn’t cut rates when business is booming. That’s foolish thinking. Rate cuts are meant to combat economic weakness, not strength. If Friday’s labor report is weak, sure, we might see a huge rally in the so-called “recession-proof” stocks. But if the non-farm payroll number is too strong, forget about any rate cut hopes. You can’t have it both ways.”
Our Methodology
The article summarizes a recent episode of Jim Cramer’s Mad Money, where he discussed and recommended several stocks. This article focuses on ten companies that Cramer highlighted and examines how hedge funds perceive these stocks. The companies are ranked based on their level of hedge fund ownership, starting with the least owned and moving to the most owned.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Jim Cramer addressed concerns about NVIDIA Corporation (NASDAQ:NVDA)’s stock weakness and whether it signals an impending recession. He clarified that NVIDIA Corporation (NASDAQ:NVDA)’s recent quarter wasn’t impacted by low demand but rather by supply issues with its high-end Blackwell chips. The problem was not with demand but with NVIDIA Corporation (NASDAQ:NVDA)’s ability to produce enough chips due to these constraints. He noted that such fluctuations in NVIDIA Corporation (NASDAQ:NVDA)’s market cap are not unprecedented and will likely occur again.
“What about tech weakness as a recession signal? I keep hearing Nvidia may have missed its quarter due to economic softness. Let’s put that rumor to bed. The issue wasn’t demand; it was Nvidia’s inability to produce enough of its high-end Blackwell chips due to supply constraints. This wasn’t a demand issue.
Now, let’s address the overblown narrative surrounding Nvidia’s stock drop, which wiped out $279 billion in market capitalization. In isolation, that sounds terrifying, but keep this in perspective: Nvidia started the year with a $1.22 trillion market cap and soared to $2.93 trillion by the end of August. Yesterday’s drop to $2.65 trillion? Sure, it’s a big number, but in the context of a stock that’s up over 100% this year, it’s not as catastrophic as it seems.
This wasn’t the first time Nvidia’s market cap has dropped over $200 billion in a day, and it likely won’t be the last. Yet, I know what you’re thinking—Nvidia’s stock is on fragile ground. That’s fair. There are still far too many investors who don’t understand what Nvidia does or how it profits from the brainpower of CEO Jensen Huang and his team.
The stock can’t stabilize until these weak shareholders sell out. Meanwhile, we’re waiting to see how quickly Nvidia can get its Blackwell chip rolling and improve gross margins—the real reason for the stock’s recent pummeling.”
NVIDIA Corporation (NASDAQ:NVDA) is a leading player in the tech industry, particularly in AI, gaming, and high-performance computing. For Q2 2024, NVIDIA Corporation (NASDAQ:NVDA) reported record revenue of $13.51 billion, up 101% from the previous year, driven by a massive surge in demand for AI chips. NVIDIA Corporation (NASDAQ:NVDA)’s data center revenue soared by 171% to $10.32 billion, reflecting the growing need for GPUs in AI applications like generative AI and large language models.
NVIDIA Corporation (NASDAQ:NVDA)’s net income also jumped to $6.19 billion from $656 million a year earlier, and its earnings per share reached $2.70, exceeding Wall Street’s forecast. Recent updates highlight NVIDIA Corporation (NASDAQ:NVDA)’s expanding role in AI. In August 2024, NVIDIA Corporation (NASDAQ:NVDA) introduced its next-generation AI chip, the GH200 Grace Hopper Superchip, which is designed to further accelerate AI tasks.
Overall NVDA ranks 4th on our list of Jim Cramer’s handpicked stocks to buy. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.