We recently published an article titled Jim Cramer Commented on 12 Stocks Linked to Data Centers. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other stocks that are linked to data centers.
Jim Cramer, the host of Mad Money, highlighted the growing significance of data centers as a major theme in the technology sector during Tuesday’s episode. He pointed out that although it might not always be immediately visible in the broader market indices, data centers have become a significant investment focus.
“The data center has been the single biggest investment story for months on end, even if it’s not always obvious from the averages… This sea-change, one that we are undergoing in real time, with the data center theme suddenly going from positive to negative, is buried within the broader indices, but it’s like a living, breathing, seething animal, a snorting bull turned into a grizzly, scratching and clawing back the gains in your portfolio.”
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Cramer offered a historical perspective, tracing the rise of NVIDIA, a graphics and gaming chip maker, as pivotal to the development of modern data centers. He explained that the company’s invention of a semiconductor capable of enabling both accelerated computing and generative artificial intelligence became foundational to a wide range of technologies.
“This semiconductor becomes the backbone of electric vehicles, of robots, and most important, of the data centers themselves… Huge warehouses full of servers. No large tech company worth its salt can afford to do without these data centers.”
However, Cramer revealed that the situation took a dramatic turn when a Chinese company found a way to achieve similar results with fewer, less expensive chips, throwing the entire data center industry into turmoil.
Describing the company as “the odd man out of the Magnificent Seven,” Cramer emphasized the company’s central role in the tech market, noting that its products are essential to the operations of numerous tech companies. Cramer pointed out that President Trump’s administration may impose tighter export controls on Chinese technology, which could further complicate the company’s market position.
Among the companies most at risk from these changes, Cramer singled out semiconductor and semiconductor capital equipment players, with the GPU kingpin standing out as the most exposed. He concluded by suggesting that some people even argue that the company’s performance could be decisive to the future fortunes of major momentum stocks in the tech sector.
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 25. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 223
Cramer noted the investors’ slipping confidence in data centers, which carries the possibility of impacting NVIDIA Corporation (NASDAQ:NVDA) but urged that the company’s upcoming earnings release will clarify many things.
“Tomorrow evening, Nvidia reports so right now I think we have two markets. There’s the market that’s dependent on Nvidia and its fellow tech titans… The selling in Nvidia world is so vicious. To the sellers, it can be only one victor and they think it’s not gonna be the data centers…
In the end, though, I don’t think things are nearly as binary as it seems. The house is not divided against itself. 24 hours from now, we’ll know if NVIDIA’s selling a lot of product or if it can’t because it doesn’t, it can’t make it fast enough. We’ll know if it’s possible that it has more large customers than just the tech titans. Oh, so we can stop counting those dollars. We’ll know if it can avoid making chips for China entirely so that that’s not a concern. It can be taken off the table. We’ll know these things to be self-evident, including all the orders. And then after we know that, life will go on. Consider NVIDIA’s earnings to be what I call a clearing event. All of the sturm und drang will already be done and the damage will be complete.”
NVIDIA (NASDAQ:NVDA), known for its advancements in graphics, computing, and networking technologies, is seeing significant growth due to its GPUs and the CUDA software platform, both of which are essential to AI infrastructure.
Overall NVDA ranks 4th on our list of the stocks Jim Cramer recently talked about. While we acknowledge the potential of 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 time frame. 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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Disclosure: None. This article was originally published at Insider Monkey.
