We recently published Jim Cramer’s Exclusive List: 10 Stocks to Monitor Closely. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other stocks Jim Cramer recommends to monitor closely.
On a recent episode of Mad Money, Jim Cramer emphasized the risks of straying too far from technology stocks, particularly the dominant tech companies, in today’s market. He pointed out how JP Morgan, despite being one of the best-performing banks, caused a stir by cutting its forecast, warning that estimates might be overly optimistic. This news hurt the broader market, dropping it by 93 points, although the S&P 500 saw a slight rise of 0.54%, and the tech-driven NASDAQ gained 0.84%.
“In this market, every time you stray too far from technology, especially the tech titans, you ultimately get slapped in the face by reality. That’s what happened today when the largest, and arguably best-performing, bank in the world, laid a huge egg with its forecast. They told us the estimates are too high, maybe way too high. That spoiled a big chunk of the market, ultimately dipping 93 points. The S&P inched up 0.54%, but the tech-heavy NASDAQ still gained 0.84%.”
Cramer explained that since the Federal Reserve gave positive signals, investors had shifted away from tech into other areas of the market. This shift was part of the “broadening out” that many investors had been waiting for, as it was believed to signal a healthier market. Financial stocks, which make up around 13.3% of the S&P 500, had been a source of excitement for those tired of relying on the leading tech stocks.
“For the past couple of months, ever since the Fed gave us the all-clear signal, we’ve seen money flow out of tech into long-neglected regions of the stock market. This is the fabled “broadening out” that people spent all year clamoring for. When we bring in more groups of winners, we’re supposed to have a much healthier market, at least that’s what they say. There are tons of financials in the S&P 500, about 13.3% of the index and the strength in those stocks was a source of much joy for everyone who had gotten sick of The Magnificent Seven.”
However, as Cramer noted, economic uncertainty and disappointing forecasts from bank companies disrupted this broader market strength. Daniel Pinto, the bank company’s COO, dashed hopes by signaling that the outlook for the bank wasn’t as strong as expected. The key issue was that net interest income, a critical measure for banks, was projected to miss expectations due to reduced capital market activity. For Cramer, this underperformance highlighted the danger of moving away from tech stocks too soon.
“But a funny thing happened on the way to that broadened-out market: we got economic choppiness. Or to use a more accurate phrase, we got guide-downs that were intolerable to any of the leaders, and the kiss of death to the stock of the bank. You can’t be a leader when you’re slashing your forecast for H2. That’s when the shareholders kick you to the curb and find someone new to follow.
But today, Daniel Pinto, the bank’s President and Chief Operating Officer, lowered the boom on the optimists who desperately wanted to buy something other than tech. The big bank told us that things are less bullish than we thought. There isn’t as much capital markets activity as we’d hoped this quarter, and most importantly, the estimates for next year are too high because of a likely miss on net interest income.”
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NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Jim Cramer believes that NVIDIA Corporation (NASDAQ:NVDA)’s recent revenue shortfall is primarily due to production delays for their new AI chip, Blackwell. He emphasizes that the demand for this chip remains extremely high, and NVIDIA Corporation (NASDAQ:NVDA) is making progress in addressing the supply issues. Cramer doesn’t see this as a significant setback for NVIDIA Corporation (NASDAQ:NVDA)’s overall performance.
“Now, I don’t see much evidence of this, though the bears will point to NVIDIA Corporation’s failure to report a spectacular revenue beat. But that only happened because their new AI chip, Blackwell, got delayed. They’re having trouble producing it at scale, which is totally reasonable. But they’ve basically solved the problem now. It’s a supply problem, not a demand problem. Demand is off the charts.”
NVIDIA Corporation (NASDAQ:NVDA) offers a strong bullish case, supported by its outstanding financial performance and leadership in AI and GPU technology. In Q2 FY2024, NVIDIA Corporation (NASDAQ:NVDA) posted remarkable earnings, with revenue soaring to $13.51 billion, a 101% year-over-year increase, largely driven by booming demand for AI and data center products. Notably, data center revenue surged by 171% to $10.32 billion, as businesses ramped up investments in AI infrastructure.
NVIDIA Corporation (NASDAQ:NVDA)’s strategic partnerships with companies like VMware Inc. (NYSE:VMW), Snowflake Inc. (NYSE:SNOW), and Hugging Face further bolster its position in the AI ecosystem, while its H100 GPUs continue to set benchmarks in AI model training. New product releases, such as the GeForce RTX 4060 and AI Workbench, reinforce NVIDIA Corporation (NASDAQ:NVDA)’s growth across multiple sectors. Looking forward, NVIDIA Corporation (NASDAQ:NVDA) projects even stronger results for Q3 2024, with expected revenue of $16 billion and gross margins between 74.8% and 75.5%.
Analysts remain highly optimistic about NVIDIA Corporation (NASDAQ:NVDA)’s future, driven by its technological dominance and the expanding global demand for AI. This combination of innovation, strategic partnerships, and market leadership makes NVIDIA Corporation (NASDAQ:NVDA) a compelling investment opportunity.
Overall NVDA ranks 2nd on our list of exclusive stocks Jim Cramer recommends to monitor closely. 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 NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
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