1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 193
Cramer discussed that NVIDIA Corporation (NASDAQ:NVDA) has recently been unjustifiably torn apart. He explained:
“Now, we got some leadership stocks that are being torn apart. The heaviest of which of course is Nvidia. Up 163% for the year, but down 22 points from its recent highest… What exactly is the matter with Nvidia, down eight out of the last nine days? I think nothing. It remains the leader in the most important space of the entire market. It’s riding a wave accurately depicted by a seasoned warrior, Matt Murphy, the CEO of Marvell Technology who said something amazing on this show about the size of the AI opportunity just last night, listen, ‘We are in an unprecedented AI supercycle for AI as a service, but also for the silicon TAM underneath it. This is unbelievable. I’ve been doing this for 30 years. I’ve been through every major one of these cycles, PCs, smartphones, digital cameras, cloud computing, you name it. This one’s bigger than all of them.’
Nvidia’s not being dethroned by any competitor. Even the companies that are trying to compete against it are faithful customers who have no choice but to try to develop something because Nvidia can’t supply, they can’t supply enough chips to meet the demand for most customers. I think it’s just profit-taking after a monster run. It has been a monster run, hasn’t it?
But I understand on January 6th, 2025, Nvidia founder and CEO Jensen Huang will be presenting a keynote at CES, the largest tech expo in the world and he’s used that podium before to introduce many of the innovations that made Nvidia one of the most valuable companies on earth. When will the stock bottom? I always let a stock tell me what to do. Nvidia bottoms when the stock rolls over at the open then hits the level on big volume where it stops before working its way back up to well above where it opened. That, people, is called a crescendo bottom when everyone of size who wants to get out has done so.
No need to jump the gun, but keep in mind that if you don’t own any, you might want to wait to get right ahead of CES. Oh, and another thing, please, if the stock opens up, please do not buy it. It rarely works.”
Cramer, highlighting the success of companies with custom silicon businesses, added:
“… Investors begin to wonder if these custom silicon companies are going to be such big winners, who are the relative losers? Now, one incredibly knee jerk and wrong answer, as I mentioned at the top of the show, is that Nvidia might be getting displaced. I think that’s one reason why the stock’s down nearly 15% from its November highs, including a big pullback today. Although it’s also because Amazon’s making chips that matter too, and Microsoft’s making its noises that it won’t be so hard to get chips, that there are no shortages. I don’t know, every long knife is coming against the stock that, you know, I like the most, which is Nvidia. I think these concerns are totally misplaced. First, as Marvell CEO, Matt Murphy, told us last night, this market’s gonna be big enough for a number of winners. Second, while the hyperscalers clearly like the custom chips they’re getting from Marvell and Broadcom, these solutions still aren’t as powerful as NVIDIA’s industry-leading graphics processors units or GPUs, which they can’t live without.
Don’t forget that Nvidia also has an enormous moat in the form of a software ecosystem to go with this hardware. Never, ever sell. Nvidia reports that the hyperscalers will spend ridiculous amounts of money on AI. Customers buy Marvell or Broadcom and they buy Nvidia too. It is so not a zero-sum game, and I’ve done so much research on this, people. It just isn’t. It’s a win for everybody… We’re standing pat on Nvidia, of course.”
NVIDIA (NASDAQ:NVDA) provides solutions for graphics, compute, and networking. Its GPUs, combined with the power of its proprietary CUDA software platform, have become essential to the infrastructure supporting AI applications. This combination has fueled significant growth for the company as major technology companies race to build increasingly sophisticated AI models.
The company’s revenue surged by 135% during the first nine months of its fiscal year 2025, reaching $91.2 billion. The growth trajectory of the company has been driven by the continued demand for its cutting-edge technologies, particularly its Hopper architecture, which is gaining traction in the AI space. Additionally, the launch of its Blackwell products is expected to further boost revenue.
For the fourth quarter of fiscal 2025, NVIDIA (NASDAQ:NVDA) anticipates total revenue of approximately $37.5 billion. This projection reflects both the sustained demand for the Hopper architecture and the ramp-up of Blackwell products. Despite strong demand outpacing supply, its management has expressed confidence in surpassing its previous Blackwell revenue estimate, with visibility into supply chains improving steadily.
As the Blackwell architecture continues to ramp up, the company expects its gross margins to moderate to the low 70s. However, when Blackwell is fully scaled, NVIDIA anticipates margins will stabilize in the mid-70s.
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) as an investment, our conviction lies in the belief that 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.
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