2. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a recent program on CNBC said major companies like NVIDIA Corp (NASDAQ:NVDA) are seeing the effects of tariffs amid their huge exposure to China. Cramer believes the company is being “punished” for doing business with the Asian country, which he believes is hostile to the US:
“I was working on my talk for the CNBC Investing Club last night, and it hit me like a bright bulb snapped on in a dark room. The real reason it is so hard for us to gain all these tariffs is that the company’s now being punished. We’re doing exactly what companies were supposed to do.”
The market will keep punishing Nvidia for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips.
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.
Here is how Cramer explained what NVIDIA Corp (NASDAQ:NVDA) is going through in the tariff wars:
“No country wants to be left behind by the industrial revolution, particularly one based on AI, right? And no country like China wants to be left behind. For Nvidia, China is the best kind of customer they could possibly have. I’m sure that China would happily buy huge numbers of chips. They’d probably buy all the chips. But what Nvidia didn’t know was that it was selling its chips to an enemy nation. I don’t blame them for not knowing because nobody knew, at least nobody was operating under the rules of either President Biden or the previous president, President Trump. China was very open for business under those two. Sure, in his first term, President Trump was no friend to the People’s Republic of China, but he wasn’t a rabid hater either. Then again, China did grow more opposition, although it’s not like it was ever a secret that the PRC was an authoritarian dictatorship with global ambitions, sometimes antithetical to that of our own. Both parties now want to contain China.”
Alger Spectra Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. In our view, Nvidia’s computational power is a critical enabler of AI and therefore essential to AI adoption. During the quarter, shares detracted from performance due to several factors. In January 2025, investor concerns grew regarding the emergence of advanced AI models from China, reportedly developed at lower costs and with reduced computing requirements, raising doubts about Nvidia’s market dominance. Additionally, U.S. President Donald Trump’s announcement of new tariffs targeting industries increased worries about higher operational costs. Despite these headwinds, Nvidia reported robust fiscal fourth-quarter results, highlighted by significant revenue growth driven by its data center segment. On the earnings call, CEO Jensen Huang emphasized the increasing computational requirements of future AI models, noting, “The more computation, the more the model thinks, the smarter the answer,” and adding that future reasoning models could demand substantially more compute resources. We believe Nvidia’s leadership in scaling AI infrastructure—including advancements in inference and reasoning during inference—continues to drive adoption among enterprises and startups, ensuring sustained demand for its high performance chips and software solutions. As older-generation chips are repurposed and new clusters deployed, we see Nvidia as well-positioned to capitalize on rising computational needs across AI applications.”
