On Monday, NVIDIA Corp (NASDAQ:NVDA) shares soared over 4% to top $514 each, marking a new record for the AI chipmaker. This surge in stock price came in response to Nvidia’s presentation at the CES event and news regarding its business dealings with China.
What Happened: Since its recent low on Oct. 26, Nvidia’s stock has experienced a 27% increase, outperforming the S&P 500’s 14% growth during the same time frame. Despite Nvidia’s stock more than tripling in the last year, CNBC’s Jim Cramer said, "I think the company still is very undervalued,” according to a report by CNBC.
Currently, Nvidia trades at approximately 24 times forward earnings, compared to its five-year average of 39, as per FactSet data. Nvidia’s faith in the leading AI chipmaker, which rose 239% in 2023, remains unshaken.
Nvidia is reportedly initiating mass production of AI chips for Chinese customers that align with the U.S. government's revised export rules on AI technology. However, Chinese tech giants including Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holdings Ltd (OTC:TCEHY) plan to order fewer Nvidia chips in 2024, favoring Chinese firms and their own custom processors instead. Regardless, Cramer downplayed this impact, suggesting that Nvidia's data center chips remain superior.
During the same day, Nvidia also announced new GPUs for personal computers and professional workstations at the CES conference. These are designed to “unlock the full potential of generative AI on PCs”.
Why It Matters: Cramer has consistently voiced his confidence in Nvidia in the face of competition and market rumors. Back in October, when there were rumors about Microsoft Corp (NASDAQ:MSFT) challenging Nvidia with its own AI chip, Cramer affirmed his positive stance on Nvidia.
Even after Microsoft launched its in-house AI chips, Cramer maintained that Microsoft couldn’t compete with Nvidia. His faith in the chipmaker has been unwavering, despite market fluctuations and competitive threats.
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