Nvidia, the leading artificial-intelligence chipmaker, has been receiving rave reviews from CNBC’s Jim Cramer, who recently cited it as one of the reasons why tech stocks deserve a premium valuation. Cramer, who has long been a fan of Nvidia and its “Magnificent Seven” peers, said that the company has a great product and a huge opportunity in the AI market.
Cramer’s History with Nvidia
Cramer, who hosts the popular show “Mad Money”, has been following Nvidia for years and has seen its stock soar from around $20 in 2016 to nearly $430 in 2023. He said that he was initially skeptical of tech stocks, especially when they were trading at high multiples, but he changed his mind after reading a Money Magazine article in 1983 that argued that tech would bounce back after sell-offs.
The article, written by a money manager, convinced Cramer to bring Microsoft to Goldman Sachs, where he worked as a stockbroker at the time. He also started investing in other tech winners, such as Apple and Nvidia. He said that these stocks have proven to be resilient and innovative over time, and have rewarded investors who stuck with them.
“Tech has a well-deserved premium because of stocks like Nvidia,” he said. “Sure, you can sell the stock here. Maybe you’ll even look like a genius if it sells off tomorrow when it reports. But people doubted Microsoft every step of the way, too. They thought it was ridiculously overvalued and couldn’t justify paying up. That’s how they missed one of the best runs in history.”
Nvidia’s AI Leadership
Nvidia is best known for its graphics cards, which are used by gamers and professionals for high-performance computing. However, the company has also been expanding its presence in the AI field, where its chips are used to power applications such as self-driving cars, cloud computing, robotics, and healthcare.
Nvidia has been investing heavily in research and development, as well as acquisitions, to strengthen its AI capabilities. For example, in 2020, it announced a deal to buy Arm Holdings, a British chip designer that supplies processors to most smartphones and tablets. The deal, which is still pending regulatory approval, would give Nvidia access to a vast network of customers and partners in the mobile and IoT markets.
Nvidia has also been developing its own software platforms and tools to make AI more accessible and efficient for developers and customers. One of its flagship products is CUDA, a parallel computing platform that allows programmers to use Nvidia’s GPUs for general-purpose computing. Another is TensorRT, an inference engine that optimizes AI models for faster performance and lower power consumption.
Nvidia’s CEO Jensen Huang has been hailed as a visionary leader who has transformed the company from a niche player in the gaming industry to a dominant force in the AI revolution. He has also been praised for his culture of innovation and excellence, which has attracted top talent and fostered collaboration across the organization.
Nvidia’s Stock Performance
Nvidia’s stock has been on a tear in 2023, rising by nearly 200% year-to-date. The company has outperformed its peers in the semiconductor sector, as well as the broader S&P 500 index. Nvidia has also become one of the most valuable companies in the world, with a market capitalization of over $1 trillion.
The stock’s rally has been driven by strong earnings growth, robust demand for its products, and positive analyst ratings. Nvidia has consistently beaten Wall Street’s expectations for revenue and earnings, thanks to its diversified portfolio of businesses and its ability to capitalize on emerging trends such as AI, cloud computing, gaming, and cryptocurrency mining.
The company is expected to report its second-quarter results on Aug. 23, 2023. Analysts are projecting revenue of $7.4 billion and earnings per share of $1.02, representing year-over-year increases of 63% and 68%, respectively. The company has also provided upbeat guidance for the third quarter, forecasting revenue of $8.5 billion.
Analysts are bullish on Nvidia’s prospects, with many raising their price targets and reiterating their buy ratings on the stock. Morgan Stanley recently named Nvidia as its top pick ahead of its earnings report, citing its leadership position in AI and its potential synergies from the Arm deal. The firm has a price target of $500 on the stock.
Cramer is also optimistic about Nvidia’s future, saying that he still likes the stock despite its recent pullback. He said that investors should not be deterred by the stock’s volatility or valuation, but rather focus on its long-term potential.
“We have stocks in this market that go down,” he said. “Stop sweating the program, and just accept the fact that stocks go down.”
