Important points
CNBC’s Jim Cramer said Monday that uncertainty surrounding Nvidia CEO Jensen Huang and the data center boom is creating new risks for the artificial intelligence chip maker’s stock price. Mr. Kramer’s comments followed Sunday’s news that Nvidia’s board of directors is investigating Mr. Huang over his affair with MegaSpeed’s Alice Huang, who is accused by U.S. intelligence agencies of spying for China. Huang remains CEO, but the investigation raises questions about his future at the company. “Given the fact that things seem to be getting worse with every update, we would have to consider owning NVIDIA stock without Jensen,” the “Mad Money” host said. “If that’s the case, we’re no longer bound by the CNBC Investment Club’s default view of ‘own it, don’t trade it.'” Nvidia shares fell more than 4% on Monday, extending the decline and wiping out about 22% of the chipmaker’s value in the last month, even as the broader market rallied. Before Monday, Nvidia’s decline coincided with a decline in the broader AI construction industry. “What you need to know is that while I still think Nvidia’s performance is solid, Nvidia is less attractive than it was a week ago,” Cramer said. “If Mr. Jensen’s transgressions mean that he can no longer lead this company, as was the case before this weekend’s revelations about spying and extramarital affairs, based solely on the election results, it will only get worse.” But that doesn’t necessarily mean it’s time to sell NVIDIA, he said. The charitable trust, a portfolio used by the investment club, first bought NVIDIA stock in 2017. NVIDIA has maintained a consistent position since the beginning of 2019. Cramer pointed to Apple’s success under Tim Cook after Steve Jobs’ death as proof that companies can grow despite losing a visionary leader. Cramer’s Charitable Trust has owned Apple for more than a decade. “We’re not going to let go of (Nvidia),” Cramer said of his charitable trust, citing what he believes is Nvidia’s deep management team and established technology leadership. “I think NVIDIA can move forward solely on the strength of its multi-year product map,” he added. Nevertheless, the increased uncertainty comes at a difficult time for Nvidia, as political opposition to data centers threatens to delay the buildout of the massive infrastructure that has fueled demand for chips and made the company one of the world’s most valuable companies. Kramer said the potential relaxation in data center construction poses greater risks for smaller, highly debt-laden neoclouds like CoreWeave, Nebius and Iren, which rely on outside capital to expand their computing capacity. Nvidia held stakes in CoreWeave and Nebius as of June 30, according to a 13F Securities filing. In May, Nvidia announced a partnership with Iren that includes warrants for up to 30 million shares. “I think the marginal buyers of NVIDIA chips may not be able to get the funding they need to build data centers on their own,” Cramer said. If these companies don’t expand aggressively, demand for Nvidia’s chips could become increasingly dependent on the spending plans of established hyperscalers like Amazon and Microsoft. Earlier Monday, Cramer recommended buying Amazon stock. Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
