We recently compiled a list of the Jim Cramer's 10 Best Stock Picks. In this article, we take a look at how NVIDIA Corporation (NASDAQ:NVDA) compares to the other stocks Jim Cramer has recommended.
On a recent episode of Mad Money, Jim Cramer discussed what he sees as Wall Street's biggest mistakes this earnings season, especially on a day when the Dow fell 141 points and the NASDAQ rose 0.2%. Cramer highlighted misleading narratives about the impact of GLP-1 drugs on food and beverage companies, the reluctance to cut prices in the wake of the pandemic, skepticism around AI investments, and the continued belief that
Intel remains dominant in the technology sector.
Cramer argues that if companies were more honest about their changing situations, they would gain credibility and potentially boost their stock prices. Instead, they confuse investors by withholding important details and are more likely to make poor decisions.
“If companies would just admit their own changing circumstances, it would be a lot easier for everyone. But who wants to admit mistakes? They earn a lot of credibility by leading the way to higher stock prices in the future, but instead their stocks languish as investors try to assess what's really going on and they assume the worst instead of the best,” Cramer said.
In a time of so much misinformation, Cramer highlighted how easy it is to be misled and the need to acknowledge these gaps. According to Cramer, food and beverage companies refuse to acknowledge the negative impact of these drugs, despite the fact that approximately 20 million Americans reportedly use GLP-1 drugs for weight loss and diabetes. They won’t even suggest it. Cramer argues that their denial of the effects of GLP-1 drugs is simply untrue.
“We know that people eat much less when they take these GLP-1s and eat fewer snacks because it suppresses the cravings for snacks. …These drugs are incredibly powerful. The idea that they don't hurt the snack companies is insane.”
Cramer commented on the rising prices, saying that most companies see no reason to lower them despite significant increases during the pandemic. He pointed out that airlines, which have consistently underperformed, refuse to lower fares and act as if the price increases never happened.
“With the airlines, there are endless companies that are underperforming. They just don't lower their prices, they pretend they didn't raise them in the first place.”
The same goes for hotels and entertainment venues, which raised prices sharply during the pandemic and are now refusing to lower them even as demand forecasts plummet. Cramer also noted that many restaurants are claiming their price increases haven’t hurt sales or are refusing to acknowledge that they need to lower prices.
“They raised prices dramatically during the pandemic. They won’t cut back on price increases too much, even now that the forecast is plummeting.”
In his discussion of AI, Cramer strongly disagrees with Wall Street's claim that AI investments are a waste of money. He points out that many believe that large companies that spend a lot of money on AI-related video chips do not see a significant return and are only investing to keep up with the competition (see 33 Top AI Companies to Watch Out For).
“We keep hearing that none of the big companies that are spending a fortune on video chips for AI have seen a meaningful return on their investment. They’re just doing it to prevent their competitors from getting a leg up. That’s what we keep hearing. It’s absurd!”
Cramer also challenged the common belief that INTC is still a leader in its sector. He dismissed claims that the company is poised for a major comeback, particularly in data centers, and that it has a chip that can match the dominance of its competitors. He pointed out that the company’s financial health tells a different story, pointing to the company’s decision to cut its dividend last year and suspend the remainder this year. According to Cramer, these actions do not indicate dominance and he warned that this is not the same semiconductor company it once was, despite what the company might claim.
“I keep hearing that Intel is going to make a huge comeback and overtake everyone else in the data center. That the data center has an Nvidia killer in GE-3. That it's going to use the chips to take your money and increase its dominance. Dream on! Have you seen Intel's balance sheet? Can you read it? Do you think a company that cut its dividend last year and then cut the rest of it this year is going to assert its dominance?! Look, this is not the Intel of the past, even though we want it to be. Despite Intel's protestations, I would not want to be a partner with Intel.”
A close-up of a colorful, high-end graphics card being inserted into a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA)
Number of hedge fund investors: 186
NVIDIA Corporation (NASDAQ:NVDA) stands to benefit significantly from the rising demand for AI, especially as more companies and researchers invest in AI development. The continued growth in AI training within data centers is the primary revenue driver for NVIDIA Corporation (NASDAQ:NVDA).
While AI technology is expected to advance significantly over the next decade, current demand already signals a strong outlook for NVIDIA Corporation’s (NASDAQ:NVDA) business. UBS analysts are expecting a 27% upside in NVIDIA Corporation’s (NASDAQ:NVDA) from its current price of $118, which would increase its forward price-to-earnings ratio to 54, indicating strong confidence in Nvidia’s future growth.
Jim Cramer points out that NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Wong has stated confidently that purchasing Nvidia chips could potentially quadruple revenues. He stresses that this is not speculation but reality, and questions how much anyone has actually gained by betting against Wong's predictions over the years.
“Nvidia's Jensen Wong has said you can get 4x your money if you buy his chips. That's a 4x return. I think Meta could eventually get that. The others are really going to have to spend money to catch up. It's not a myth, it's reality. How much money have you made over the years betting against Jensen Wong?”
General NVDA is in 3rd place on our list of Jim Cramer's stock picks. While we recognize NVDA's potential as an investment, our conviction is based on the belief that under-the-radar AI stocks offer a better chance of higher returns, and in a shorter time frame. If you're looking for an AI stock that shows more promise than NVDA but trades at less than 5x earnings, check out our report on the cheapest AI stocks.
READ ALSO: Analyst Sees New $25 Billion 'Opportunity' for NVIDIA And Jim Cramer Recommends These 10 Stocks in June.
Disclosure: None. This article was originally published on Insider Monkey.
