Jim Cramer cautioned against investors panic selling NVIDIA Corp NVDA shares following news of a Justice Department subpoena over monopolistic practices.
What Happened: On Tuesday, Cramer, the host of CNBC’s “Mad Money,” emphasized that Nvidia could see further declines but cautioned against panic selling due to the DOJ’s investigation. He urged investors to revisit previous instances where the DOJ scrutinized Nvidia for similar concerns.
“OK Panickers, I am still telling people that Nvidia could go lower but if you are selling because of the Justice Department subpoena go back and read where Justice was looking into Nvidia when it came to monopolistic behavior. That’s what this is about…,” Cramer wrote.
The DOJ has reportedly issued subpoenas to Nvidia and other companies as part of an intensified probe into potential antitrust violations.
The investigation is examining whether Nvidia penalizes customers who do not exclusively use its chips and if it complicates switching to other chip suppliers. The DOJ’s San Francisco office is leading the investigation.
Why It Matters: The scrutiny from the DOJ comes at a critical time for Nvidia. Recently, Cramer highlighted that Nvidia’s second-quarter earnings were misunderstood by many investors, referring to them as “sunshine soldiers and summer patriots.”
Adding to the complexity, Nvidia’s stock has experienced a significant decline since its second-quarter earnings report, losing a combined value equivalent to that of McDonald’s, Disney, and Coinbase. This has raised concerns among investors about the company’s future performance.
While the second-quarter earnings report exceeded estimates, several concerns emerged: investors and analysts noted that the company is now achieving these beats and revenue growth at slower rates compared to previous quarters. In essence, the outperformance is becoming less significant.
Despite these challenges, some analysts remain optimistic about Nvidia’s long-term prospects. Gene Munster of Deepwater Asset Management recently stated that Nvidia, along with Apple Inc., will lead a three- to five-year tech bull run.
Moreover, Nvidia is projected to reach a $10 trillion valuation by 2025, driven by its next-generation AI chip, Blackwell, according to Beth Kindig, lead tech analyst at I/O Fund.
Price Action: Nvidia’s stock closed at $108.00 on Tuesday, down 9.53% for the day. In after-hours trading, the stock continued to decline, dropping an additional 2.42%. Despite the recent dip, NVDA’s stock is up 124.21% year to date, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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