Jim Cramer Critiques China's Potential Nvidia Restrictions, Backs CEO Jensen Huang

Jim Cramer has voiced his disapproval of potential restrictions on Nvidia Corp. (NVDA) in China, dismissing concerns about regulatory challenges as "pathetic."

What Happened: In a recent post on X, Cramer questioned the rationale behind limiting access to Nvidia's advanced chips, stating, "Like China would ban the best of the best? Really?"

Cramer's remarks come at a time of increasing tensions between the United States and China, particularly in the semiconductor technology arena. Recently, China’s National Development and Reform Commission has put forth new energy efficiency regulations that might hinder Chinese firms from acquiring Nvidia’s specialized H20 processors.

While acknowledging the challenges Nvidia is facing, Cramer expressed his confidence in CEO Jensen Huang to navigate through these obstacles successfully.

The Financial Times indicated that these regulatory measures could bar significant Chinese tech companies like Alibaba Group Holding Ltd. (BABA) and Tencent Holdings Ltd. from utilizing Nvidia's chips. This development puts Nvidia's $17 billion annual revenue from China at risk, as this market ranks as its fourth-largest.

"Like every day, the Long Knives are out again for Nvidia. Today's bear claims that Nvidia's chips violate Chinese environmental rules. Pathetic…" Cramer tweeted.

Despite the numerous challenges facing Nvidia, Cramer believes that Huang can manage it. He remarked, "The world, including China, needs more compute. You can't do it without Nvidia." He pointed out the impracticality of China trying to replace Nvidia's chips: "What do the Chinese have to replace Nvidia chips? And the new chips are the least hot. It makes me laugh how these stories come out. A country that builds endless amounts of coal plants is not going to cut its nose off to spite its face. Just plain dumb."

Why It Matters: Cramer stressed the crucial importance of Nvidia’s technology, asserting that, "You can’t do it without Nvidia." He further implied that any restrictions would backfire on China, given the difficulty in finding suitable alternatives to Nvidia’s advanced chips.

Nvidia remains focused and has plans to engage with commission chair Zheng Shanjie to find solutions that comply with the new regulations. The company’s latest financial results reflect its strong market position, with fourth-quarter revenue hitting $39.3 billion, marking a 78% increase, and forecasting a first-quarter revenue of $43.0 billion.

As domestic competitors like Huawei Technologies Co. push their AI chip capabilities, the landscape of the semiconductor industry continues to evolve in this intense global technological rivalry.

Price Action: On Wednesday, Nvidia's stock was trading at $113.76, experiencing a decline of 5.74%, and further dropped to $112.21 in after-hours trading, down 1.36%.

While Nvidia continues to outperform Intel Corp. and Advanced Micro Devices Inc. in growth and momentum, it still trails in valuation metrics, according to Benzinga Edge rankings.

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Nvidia, China, JimCramer