NVIDIA Corporation (NASDAQ:NVDA) continues to be one of Cramer’s top stocks due to the key role that the firm is playing in the AI rollout. The shares are up by more than 15% year-to-date, and recently, the stock struggled after Anthropic’s CEO Dario Amodei and others stressed the need to slow down the development. In his morning appearance on the 18th, Cramer discussed NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Huang’s take on the matter and another important aspect of the firm:
“Okay, look, I think it’s Jensen versus people, let’s just say the people who say, slow down. We know who they are.
“Well I’ll tell you what’s interesting, cause I like, you know I like NVIDIA. There’s a report out by Evercore today which is talking about the long life of an NVIDIA chip, that’s even longer than we think. . .I just really think that, people don’t understand, that these things are not only holding there value, but if you bought one a few years ago, I mean how many things other than wine, if you bought six, seven years ago, is worth more? . . .no, they’re [Ferrari] not holding it like this. No.”
The bit about the long life of NVIDIA Corporation’s chips is key to the firm’s narrative and the overall profitability of the AI buildout. Longer lifetimes for GPUs mean that firms that use them can depreciate the costs for a longer duration, and with depreciation dropping with time, increase their profitability. Additionally, the higher profitability means that hyperscalers can maintain high capital expenditures for longer time periods and benefit NVIDIA Corporation for the long term.
On the flip side, the longer life cycles also mean that NVIDIA Corporation’s immediate revenue growth also slows down and the supply of used systems lingers for longer in the market to compete with the latest products such as Blackwell and Rubin GPUs. Consequently, the longer life cycles are a double edged sword for NVIDIA Corporation, and their benefit to the firm depends on whether the demand for AI compute is sustained through multiple use cases such as sovereign AI.
Looking at the broader narrative, for NVIDIA Corporation, it’s all about the sustainability of AI demand. Cramer alluded to it as well after he discussed the firm in a tweet after Amodei’s remarks. The CNBC TV host predicted that the stock would initially dip and then slowly claw back up. With the shares closing 1.8% higher last week, his remarks turned out to be true.
As for the demand, NVIDIA Corporation continues to grow rapidly. In its second quarter, the firm’s revenue and profit jumped by 106% and 120%. AI fueled the growth, with the data center business outpacing revenue growth by 14 points. For its third fiscal quarter, NVIDIA Corporation expects to grow revenue by roughly 90%. While the guide does indicate growth, it also shows that a higher base is slowing down the growth in percentage terms. Additionally, investors are also focused on the firm’s margins as high memory prices continue to make their impact on the business.
Amidst all of this, NVIDIA Corporation remained one of the largest hedge fund holdings in Insider Monkey’s database as 285 funds had disclosed a stake in the firm in Q2. Additionally, the weak share price performance has also impacted the valuation. NVIDIA Corporation’s forward P/E ratio of 24.51, which is lower compared to Intel’s 56.50 and AMD’s 35.97. Yet, short interest as a percentage of float is also lower.
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