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If there is one contra-indicator that can supercharge the conviction around a given stock, it is – in our humble opinion – the voluminous recommendations that emanate so frequently from that fount of wisdom, the legendary CNBC host, Jim Cramer. Well, NVIDIA bulls should now rejoice as the dreaded Cramer curse just turned into a potent tailwind for the stock.
Jim Cramer consistently parrots the consensus opinion – a practice that rarely generates any market-beating returns. It is for this reason that we consider the CNBC host one of our favorite indicators to gauge the market’s sentiment. And we have the empirical evidence to back this claim. After all, as we reported around two weeks back, IndexOne’s Inverse Cramer ETF continues to handily beat the market, offering a loss of just 3.98 percent so far in 2022 when the benchmark S&P 500 index is down a whopping 18.69 percent. This means that the ETF is beating the broader market by 14.71 percent. What does this mean for NVIDIA’s prospects? Let’s find out.
As you can see in the YouTube video above, Jim Cramer has turned bearish on NVIDIA, citing the ramifications of Ethereum’s transition to a Proof-of-Stake (PoS) transaction authentication mechanism as well as the still-considerable time lag involved in realizing and monetizing NVIDIA’s AI-related ambitions.
— Stock Talk Weekly (@stocktalkweekly) September 19, 2022
Of course, we had recently noted some of the other headwinds that currently surround NVIDIA shares, including an expected $400 million hit to the company’s sales in the next quarter alone as a result of the decision by the US administration to now impose a license requirement for the export of NVIDIA’s data-center-focused A100 and H11 GPUs to Russia and China. Moreover, NVIDIA is also suffering from a broad-based slowdown in PC demand. For instance, Micron has projected that PC demand would decline by around 10 percent in FY 2022.
However, with NVIDIA shares down over 55 percent so far this year, much more than AMD’s 49 percent loss and Intel’s 45 percent loss during the same timeframe, a case could be made that a significant proportion of the headwinds surrounding the stock have already been priced in. In fact, this is exactly what Stifel noted when it recently began coverage on NVIDIA shares, eyeing a 20 percent upside from the current levels. While Stifel analyst Ruben Roy did concede that the “abrupt” decline in NVIDIA’s gaming revenues will likely remain a concern through the end of this year, his conviction that the bottom is near for the stock keeps growing on account of the additional clarity that is soon to materialize vis-à-vis NVIDIA’s plans for its Ada (Lovelace) architecture for GPUs. Moreover, the company’s data-center business is expected to receive a boost from the production ramp-up of its Hopper line of products.
Add to this the Cramer curse tailwind and NVIDIA bulls should start to feel a lot comfortable going into the next quarter.
Do you think the Cramer curse will prove to be a boon for NVIDIA shares? Let us know your thoughts in the comments section below.