Jim Cramer Issues Caution on Nvidia's Surging Stock Amid China Investigation

Jim Cramer has shared his observations regarding Nvidia Corp. (NVDA), advising investors to be cautious as the company’s stock has jumped an impressive 174% this year. Cramer warns that the semiconductor giant may soon face a market correction.

What Happened: Cramer noted on social media, "Still no crescendo moment in Nvidia. It will happen, just not yet... the reversal will be vicious though... and fast,” as Nvidia’s stock dipped by 1.68%, closing at $132.00.

This warning arises at a time when Nvidia is under increased scrutiny from Chinese regulators, who have initiated an antitrust investigation into the company’s 2020 acquisition of Mellanox Technologies.

The investigation is looking into possible anti-competitive behaviors, including whether Nvidia restricts competition by bundling its AI chips with Mellanox’s NVLink technology.

Why This Matters: Analyst Ming-Chi Kuo from TF Securities has indicated that this investigation might take a long time to resolve, drawing comparisons to Qualcomm Inc.‘s prolonged 15-month antitrust case in China. Although China contributes only 5% to Nvidia’s data center revenue, Kuo suggests that investors should brace for more regulatory scrutiny regarding Nvidia’s practices, especially around its CUDA platform.

Despite these challenges, Nvidia continues to hold a strong position in the AI chip sector. The company recently announced third-quarter earnings of $35.1 billion, marking a substantial 94% year-over-year increase. With a market value of $3.21 trillion, Nvidia ranks as one of the top companies globally, boasting a price-to-earnings ratio of 53.

Market analysts remain optimistic, with 40 experts setting an average price target of $170.56 for Nvidia. Notably, Rosenblatt Securities has the highest target at $220, while New Street Research anticipates a low of $120. This variety of projections highlights differing expectations despite Nvidia's robust growth.

In Conclusion: Given the potential for a significant correction in Nvidia’s stock and ongoing regulatory challenges, investors may want to remain vigilant and consider the broader market conditions when making investment decisions.

Nvidia, Cramer, Stocks