Want to start a position in Nvidia, but think it’s too late? The stock hit an all-time high on Thursday, but has since rapidly fallen 7%. We know that Nvidia can be volatile in the short term. We believe a “beat and raise” quarter is a minimum requirement since earnings will be announced on Wednesday night. As I wrote in Sunday’s earnings preview, this has been a bar for years now. Even if it clears that bar, there is so much movement that there is no telling where the stock will trade after its release. We tend to like our hot stock to cool down a little before printing. How does this square with Jim Cramer’s column from a few weeks ago about why it’s okay to buy stocks related to the secular artificial intelligence boom “even if you’re late”? Listen to Nvidia CEO Jensen Huang talk about how AI is the fourth industrial revolution and the next stage of agent AI will require 100 times more computing power than is currently available, but it may be too soon. And what about Amazon CEO Andy Jassy? He told Jim earlier this month that investors will benefit from all of the company’s AI spending. In general, it’s not our style to chase stocks near all-time highs, and we don’t like to buy stocks on earnings releases. Even if the numbers are correct, the price reaction is too difficult to capture. However, for those who don’t currently have Nvidia’s position on their books, this is where we stand. “If you want to buy something here, I fully support it. We just feel like we own it, and we don’t want to trade it,” Jim said during Monday’s morning meeting. Indeed, given the explosive rise in Nvidia and other stocks over the past three years, it’s hard to believe it’s too late now. But if you have a long road ahead of you and never open a position because you’re worried you’ve missed out on a bull market that’s already happened, you’re violating number 13 on Jim’s list of investing rules: “You should, you should, you shouldn’t.” If you haven’t started a position at Nvidia yet, don’t let past misbehavior prevent you from joining. Jim has repeatedly spoken publicly about his mistaken resignation from Alphabet in March 2025 due to concerns about AI and federal lawsuits. It quickly became clear that AI was not the problem, and neither were governments. The club relaunched its position at Google’s parent company in late December 2025 after a significant rise. We built it up over time and now have 30% unrealized gains. We think that’s just the beginning. It hasn’t been easy to admit past mistakes and realize that Alphabet is on a winning path. But it was necessary. Returning to Nvidia, from a valuation standpoint, there’s not much room for debate. Compared to its peers, the company’s stock is clearly undervalued from a price-to-earnings ratio perspective. Based on future earnings, Broadcom (also the club’s name) is valued at 28 times, Marvell at 39 times, Advanced Micro Devices at 44 times, and Intel at 86 times. Nvidia trades at just 24 times forward earnings, despite being a name at the heart of the entire AI industry. The company has more tentacles than any other company, thanks to a series of high-profile investments aimed at both major data center suppliers and customers. As we see it, the question is, given the deep valuation discount to its peers, expectations for continued earnings growth, and near-term earnings drivers, should you continue to wait before buying? Warren Buffett once said, “Investing is simple, but it’s not easy.” The simple idea is that you can teach just about anyone how investing works and how to read financial statements and stock charts. What is not easy is controlling your emotions and staying disciplined. It’s probably the most important factor in being a successful investor over the long term. I don’t care who you are. As we saw with our cybersecurity stocks earlier this year, it’s not easy to watch a name you believe in lose more than a third of its value in a short period of time. It’s even harder to do what you know you need to do, which is make additional purchases, when the stock price is moving in the opposite direction of what you believe the fundamentals are telling you. That’s what we did. We bought CrowdStrike twice when the stock market was tanking in February and March. The market is finally coming back to our view that AI increases the need for cybersecurity, not reduces it. On Monday, we cut CrowdStrike to protect some of these hard-fought gains. One way to keep your emotions in check is to consider the risks and rewards. Nvidia is seen by many to be the favorite to reach the fabled $10 trillion market cap, which would mean an upside of about 82% from here. NVDA YTD Mountain Nvidia YTD technical analysis, based on the polarity principle (old resistance turns into support once it is overcome), places potential support somewhere in the $217 range (old high), which corresponds to just over 2% downside. Therefore, we now need to consider the long-term outlook. If you subscribe to the idea that this name could one day reach a value of $10 trillion, then you can expect a risk-reward ratio of around 1:40 (with support below 2% below the current price, but the stock price could rise to 80% over the next few years). (This is the ratio you’re looking for if you think it could go up by more than a %.) I’m trying to be cute without getting into too many details about it, so you don’t have to worry about getting the stock 2% cheaper, you can buy it. If the market offers a better setup a week from now (assuming NVIDIA isn’t trying to derail the train it’s running on), I’ll still buy that too since I have some headroom left. Even if the downside turns out to be a bit larger than expected, the valuation relative to its peers, as well as Nvidia’s own historical valuation range and potential upside, suggest there is a sufficient margin of safety at current levels. If you have a small position, you can expect a ripple to the upside, and you can take solace in the fact that it is better to make some money than nothing. On the other hand, if there is a dip, you can rest assured that short-term declines will only boost long-term profits, as buying on weakness reduces your overall cost base. Conclusion There are three fundamental reasons to own Nvidia without trading. It’s cheaper than its peers, still growing rapidly, and now emerging from a long period of consolidation. Throughout earnings season, I haven’t heard a single comment from hyperscalers to suggest that demand in recent months has done anything other than strengthen. And with billions of dollars already invested, Alphabet, Amazon, Microsoft and Metaplatform have revealed plans for at least $695 billion in capital spending this year, along with revenue, a 14% increase from previously expected $608 billion. I hope Nvidia gets its fair share. If you don’t have a position, it’s up to you to buy Nvidia ahead of Wednesday night’s earnings release. But given our argument that NVIDIA is better in any portfolio, even at its current price, there’s probably no wrong answer. (Jim Cramer’s charitable trusts are long NVDA, AVGO, GOOGL, AMZN, META, MSFT, CRWD. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
