During the September 28 episode of Mad Money, Jim Cramer focused on NVIDIA Corporation (NASDAQ:NVDA), reiterating his classic mantra to own rather than trade the stock while highlighting a major corporate development. He commented:
Of course, remember the other own it, don’t trade stock, NVIDIA. Today, it announced a sound plan based on engineering that could control the run amok autonomous agents. We keep hearing about ones unleashed by Anthropic and OpenAI. Many other big tech companies, including Anthropic, have joined NVIDIA’s effort. Plus, NVIDIA announced a monster $150 billion buyback today. That’s the biggest ever. Watchers in this show and members of the CNBC Investing Club know I’ve been calling for that. Let’s hope it’s actively managed to take advantage of momentary dips.
NVIDIA ranks #6 on our list of 11 AI Stocks That Will Go to the Moon. Which five AI stocks rank even higher? Check out the full list here.
Data Center Expansion And Extraordinary Cash Generation
The fundamental bull case for NVIDIA Corporation rests on operating metrics and unmatched cash generation capacity. The company recently posted quarterly revenue of $96.2 billion, representing a massive 106% increase year-over-year, supported by Data Center revenue surging to $89 billion. Gross margins remain exceptionally strong at approximately 75%, supported by towering demand for accelerated computing platforms and rapidly scaling next-generation architectures like Vera Rubin.
The high-margin revenue model translates into immense free cash flow, allowing NVIDIA to comfortably fund massive capital return initiatives, including its $150 billion share repurchase authorization, along with strategic investments and infrastructure commitments without straining its strong balance sheet.
We also recently discussed a new possible sovereign-AI rival to NVIDIA, which you can read about here.
Margin Pressures And Memory Pricing Headwinds
The bear case for NVIDIA Corporation is about structural concentration risks and valuation sensitivity rather than profitability collapse. While management’s gross margin outlook remains elevated at 74%, plus or minus 50 basis points, maintaining these historic profitability levels requires navigating escalating high-bandwidth memory costs and intensifying research and development expenditures for next-generation systems.
In addition, the company faces customer concentration risk, with a small number of major hyperscale cloud providers accounting for a dominant share of total data center revenue. It exposes the semiconductor king to significant financial downside if any single hyperscaler scales back its infrastructure spending cycle. Coupled with the persistent threat of tightening export restrictions in international markets and the immense pressure of meeting high forward revenue expectations, the stock remains vulnerable to valuation contraction if enterprise AI adoption normalizes.
Increasing Hedge Fund Holdings And Low Short Interest
According to Insider Monkey database metrics covering institutional portfolios, 285 hedge funds held positions in NVIDIA Corporation at the close of the second quarter, up from 275 funds in the first quarter. With nearly 91 million shares, Fisher Asset Management was the company’s top hedge fund holder in the second quarter. The short interest remains remarkably subdued at 1.27% of the float.
With a historic share buyback program potentially providing support during market pullbacks and unparalleled demand across the data center landscape, the chipmaker commands premium positioning. Trading at about 16.5 times 12-month forward earnings as of September 28, NVIDIA was below the S&P 500’s roughly 19x forward multiple. The remarkably compressed multiple relative to its sheer revenue velocity highlights how surging net income continues to match its market valuation, offering a surprisingly rational entry point for investors seeking direct exposure to the ongoing artificial intelligence infrastructure build-out.
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