Nvidia takes the market lower — but one area of beaten-up tech moves higher

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Stocks were lower on Thursday as the S&P 500 gave back Wednesday's gains. The biggest story in the market was that Nvidia shares pulled back despite another impressive quarter and guidance. Part of the more than 5 percent decline was due to doubts about the ability of Nvidia's core customers to keep spending. But hyperscalers like Amazon, Alphabet, Microsoft, and other portfolio names like Meta Platforms continue to increase their capex forecasts because computing capacity is directly tied to revenue. The more they spend, the more income they earn. Our long-term bullish view on Nvidia shares remains unchanged. The most interesting thing about Nvidia's decline is that it triggered a major reversal in the "sell software, buy semiconductors and AI infrastructure" trade that has dominated the past few weeks. We see this rotation resulting in gains in cybersecurity names CrowdStrike and Palo Alto Networks, as well as outdated software stocks like enterprise-focused Salesforce, and declines in Nvidia, Broadcom, Corning, GE Vernova, and Eaton. Qnity Electronics was also caught up in the rotation despite reporting strong results earlier Thursday. It can be bad to watch these countertrend rotations crush big winners in the portfolio. We don't have an estimate on how long this will last, but what happened on Thursday is why we always try to take some profits when stocks are going parabolic. We may not always reach the top. Very few investors will do this. But these rotations can be brutal, and trimming positions gives us the flexibility and cash to step back and buy back shares at more attractive levels in the future. Following the closing bell are earnings from CoreWeave, Dell Technologies, Zscaler, Intuit, MP Materials and Block. CoreWeave results give us a fresh look at AI computing demand and data center build rate, while Dell's results will highlight the servers and networking hardware installed in data centers. There are no significant gains ahead of the opening bell on Friday. On the data side, the January producer price index comes out at 08:30 ET. (See here for a complete list of stocks in Jim Cramer's Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.