3. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a program last month mentioned how and why he recommended investors trim their Nvidia stakes.
“I put out a piece yesterday that was quite painful for me to write to the club members. I do a big Sunday think piece, and it was about how you could no longer trust the government in NVIDIA Corp (NASDAQ:NVDA). You could just no longer do it. So therefore, you can’t own it like you used to, meaning you have to trim. And I said, “I’m going to have to sell some.” One of the reasons I did it—well, it turns out just this very evening, without any notice, different from even when I talked about it at the top of the show, the government decided, you know what, we’re going to put new restrictions on the H20, which is the dumbed-down version of the latest and greatest NVIDIA Corp (NASDAQ:NVDA) chip. And it’s really kind of shocking. But is it really? I wrote that piece because I expect stuff like this to happen, and it’s going to have a big charge. It’s a different world. Nvidia gives a huge amount of money, decides to build as much here like Apple—it buys them nothing. All that I know is that if you do a lot of business in China—and if you’re a club member, you know this—then your stock’s going to suffer. And that includes now NVIDIA Corp (NASDAQ:NVDA) too.”
Most of Cramer’s concerns were related to Nvidia’s China exposure. Now that the US has reached a 90-day deal with China on tariffs, it would be interesting to see Cramer’s response. Nonetheless, the core threats to Nvidia remain.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offers alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU, set to be produced on its 18A or 14A node.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the undisputed leader in accelerated computing, with dominant market share in Graphics Processing Units (GPUs) powering AI workloads across data centers, edge devices, and emerging platforms. Its end-to-end ecosystem—from silicon to software (CUDA, networking, and AI frameworks)—creates high switching costs and a widening competitive moat. With secular demand for AI infrastructure still in its early innings, Nvidia stands to benefit from sustained topline growth and strong operating leverage. In early January, a little known Chinese AI company, DeepSeek, released its large language model (LLM), DeepSeek-R1, to an unexpecting world. This model was purportedly trained on very few high-end Nvidia chips and was highly efficient when compared to other leading models. This release set off a chain reaction where investors have had to grapple with the idea that the world may not need as many GPUs as previously thought, which hampered the Nvidia buy case and sent the P/E multiple down to its cheapest level in the past 5 years.”
