Is now the time to buy Nvidia? Cramer says ask these questions to arrive at an answer
The war in Iran is forcing investors to act like military strategists rather than stock pickers, CNBC’s Jim Cramer said Thursday. But he recommended that investors ask themselves a series of questions that will guide their decision-making while the resolution of the dispute is still uncertain.
“I’m going to reverse the whole process and think about what the war really means for someone who’s just trying to build a portfolio,” Cramer said on “Mad Money” shortly after President Donald Trump announced he was extending his pause on bombing Iran’s energy facilities until April 6.
“We know we can’t predict the outcome of the war. Nor can we predict the timing, as tonight’s extension of the bombing pause shows… But we can gauge whether the stocks we like have a big connection to the war,” Cramer said.
Nvidia Cramer said this is a “clear” example where using a checklist can help determine whether a stock is worth buying right now. Shares of the leading AI chip maker have fallen just over 3% since Feb. 27, the last trading day before the war began.
“First of all, we need to ask whether Nvidia’s shares are down because of the war,” Cramer said. In Nvidia’s case, he said, it was difficult to gauge its direct ties to the conflict. “Nvidia is a big part of the stock market and that’s why it’s the easiest stock to trade in the world. I think it’s falling because it’s so easy to bounce back lower.”
Interest rates are another factor to consider, Cramer said, because higher interest rates can increase borrowing costs and, as a result, slow data center build-out. “That said, if the war ends soon and we have a new Fed chief, you’ll feel like a fool for staying away from Nvidia,” he argued.
Third, Cramer said investors should consider whether there are unique reasons for Nvidia’s performance. “Right now the tech industry is short on what we call computing, and it’s short on memory. That means computers with Nvidia in them are also short,” he said. Cramer acknowledged that very high memory prices could indirectly increase demand for Nvidia chips, given that the overall cost of servers will be higher and will eat more into customers’ budgets. However, he noted that the underlying demand picture is still strong.
Oil is also a factor, but Cramer isn’t too worried about it. “Nvidia’s data centers are mostly US-based and run on barely moving natural gas,” Cramer said. “Customers could definitely be affected, but anything you use Nvidia on is considered mission critical, so I’m not worried.”
Finally, Cramer said investors need to know whether demand for Nvidia products is weakening regardless of the war. “It’s conceivable that sovereign capital in the Gulf would dry up, which would fund a lot of data centers… But I attended the Nvidia GTC conference last week and learned that demand is incredibly strong,” he said.
Cramer said that if the war continues, there may be more negativity in Nvidia shares in the near term, so he is hesitant to put the stock on the table. But if he had to choose, he said he would prefer to buy a little early rather than be late to the rally.
“You ultimately have the opportunity to buy a high-quality stock at a lower price than you would normally expect,” Cramer added. “You can’t time it. Remember that.”
Disclosure: Cramer’s Charitable Trust, the portfolio used by CNBC Investing Club, owns shares of NVDA.
