We recently published a list of Jim Cramer’s Thoughts on These 5 Stocks. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against other stocks that Jim Cramer discusses.

On Tuesday, Jim Cramer, host of Mad Money, shared his thoughts on the current state of the market, especially about AI stocks. He noted that despite the enthusiasm surrounding AI, investors are no longer willing to pay high prices for stocks tied to this technology. Cramer explained that on days like Tuesday, people in the market are feeling what he referred to as “painful shrinkage.”

“In this business, shrinkage means paying less for the same earnings that you were willing to pay up for only just a week or two ago.”

READ ALSO: 7 Stocks on Jim Cramer’s Radar and Jim Cramer Put These 10 Stocks Under the Spotlight

He pointed out that this phenomenon is commonly known as price-to-earnings multiple compression, a widespread trend across the market. Cramer asked why this is happening, especially when it seems like nothing has changed with the companies themselves. He explained:

“Look, when everyone’s terrified that a piano’s about to fall on their heads, they don’t want to get hit by the baby grand and right now they don’t want to own the falling stocks either. So they sell but they can’t get a good price anymore because too many people want out for the same reasons. They think that stocks are overpriced versus when we consider what could lay ahead.”

Cramer further elaborated that there is a strong sense of apprehension in the market right now, with investors bracing for potential economic challenges. Despite good news that may come out about companies or the economy, people are reluctant to hold onto stocks because they are anticipating weakness down the road.

He said that even though they cannot see it clearly, the ongoing concerns about the economy and the administration’s messaging about necessary economic adjustments create a climate of fear. As Cramer put it, “If the administration keeps talking about how we’re transitioning, how the economy needs to make some painful adjustments, then any big rally that we had Friday and yesterday will become magnets for sellers.”

“Here’s the bottom line: This latest round of multiple compression came on a day of wonderment about artificial intelligence, and even with Jensen’s fabulous speech, multiple compression was just much more powerful. You know what? It’s going to stay that way until we get through this environment, either because the White House backs off, or because stocks come down to the point where we simply get used to it.”

Our Methodology

For this article, we compiled a list of 5 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on March 18. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 223

Asking how pervasive the negativity was on Tuesday, Cramer mentioned NVIDIA Corporation (NASDAQ:NVDA) and said:

“Well, we had a real test case today, didn’t we?… When you put 17,500 NVIDIAns and friends… in San Jose, you’d expect some sort of impact on the stock market or at least in the stock of NVIDIA but that sure didn’t happen. Today, we learned that nothing’s more powerful than multiple compression as NVIDIA’s stock actually slid $4 and 10 cents. It declined 3.4%. I say ouch…NVIDIA stock isn’t cheap unless everything goes right and in this climate of fear environment, it’s hard to see everything going right even for a company that is this special.”

Attending NVIDIA’s (NASDAQ:NVDA) annual GTC conference, Cramer highlighted various AI innovations from leading companies. NVIDIA’s CEO Jensen Huang presented the company’s latest chip lineup and gave a glimpse of upcoming advancements in the broader AI field. Cramer went on to say:

“So all these announcements from NVIDIA might mean everything for the future, but they meant nothing for the today… Anyway, yes, the invisible disease known as multiple compression is just that powerful and it really comes after tech stocks because they tend to be very expensive. NVIDIA stock isn’t all that pricey, but the expectations for the keynote were high. So even though it was spectacular, nobody’s gonna care in this environment.”

NVIDIA (NASDAQ:NVDA) is recognized for its advancements in graphics, computing, and networking technologies, especially its graphics processing units and the CUDA software platform.

Overall, NVDA ranks 1st on our list of stocks that Jim Cramer discusses. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.