Jim Cramer’s Investing Club upgrades Nvidia (NVDA). Here is why
We’ve seen enough: The market is gifting investors with an entry point to Nvidia. Accordingly, we are raising Nvidia back to our buy-equivalent 1 point, in line with Jim Cramer’s comment on the Monday Morning Meeting. Nvidia reported a strong quarter with even stronger guidance on Wednesday night. But still, the stock fell just over 9% on Thursday and Friday; This in no way reflected what we saw in the numbers and heard on the conference call about current and future demand for Nvidia’s best-in-class AI computing platform. Shares are erasing some of those two-day losses on Monday, but our overall view of the confusing post-earnings market reaction is correct. You could say the same thing about the way the stock has been trading for months. Despite ample evidence that AI spending is increasing, Nvidia shares are currently trading at about the same price as they were in August. This is seven months of consolidation. The result: The stock is now much cheaper because earnings estimates have priced in the fire of AI spending. In August, the stock traded in the mid-30s on a forward price/earnings basis. It is currently at 22x forward earnings; It is the lowest level since the tariff announcement last April. This is already attractive. But in our view, the stock may turn out to be much cheaper in hindsight, as we believe many people did not fully appreciate the magnitude of the investments going into the “Fourth Industrial Revolution”. NVDA .SPX mountain 2025-07-Nvidia’s stock performance versus the S&P 500 since the beginning of August 31, 2025. We’re not the only ones using the recession to be more bullish on Nvidia’s stock. Semiconductor analysts at Morgan Stanley renamed Nvidia their top pick, displacing Micron, as shares caught fire due to an AI-related surge in memory prices. “In the last two quarters, NVIDIA has not moved as its business continues to strengthen, which is a result of concerns about the durability of current growth. These concerns should translate into 2027 enthusiasm in the coming months,” the analysts wrote. Morgan Stanley’s comments on the AI spending landscape were encouraging and touched on an important debate in the market. Some investors are concerned about the sustainability of AI data center deployment; The question is how far they can stretch their cash flow while maintaining large capital spending budgets like Amazon and Meta Platforms. Nvidia and other chipmakers directly benefit from hyperscalers’ spending, so concerns about the scale of spending are important to both shareholder bases. “We’re seeing hyperscalers placing 3-year orders with memory suppliers, in some cases with full down payment; they’re literally taking 100% of 2028 revenue this quarter with volumes at multiples of current levels. Are they doing this with the intention of slowing spending next year? This is just one of dozens of indicators that suggest spending will continue to rise for several more years,” Morgan Stanley said. he wrote. Another concern that Nvidia shares have expressed in recent months is competition. But the world’s most valuable company is not sitting idle. Late Friday, The Wall Street Journal reported that Nvidia was designing a new chip specifically to meet the demand for everyday AI model use, a process known as inference. Nvidia’s powerful graphics processing units (GPUs) are known for their capabilities in training, the process of preparing artificial intelligence models to perform real-world tasks. In designing this inference-focused chip, Nvidia reportedly leveraged technology from AI startup Groq, with whom it signed a $20 billion non-exclusive licensing deal late last year. Nvidia CEO Jensen Huang appeared to mock the product on last week’s earnings call, citing its highly successful acquisition of Mellanox, which is a key part of its networking business. “As we did with Mellinox, we will reach new levels of AI infrastructure performance and value by extending Nvidia’s architecture with Groq’s innovations. We look forward to sharing more at GTC next month,” Jensen said. Based on what we know now, we like the plan for Groq’s technology and believe it will serve to combat pressure from proprietary solutions in which many large data center operators have invested. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of stocks.) As a subscriber 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 would wait 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.
