Jim Cramer: Nvidia is 'still undervalued' even as stock jumps 4% to new record

Published Mon, Jan 8 20241:03 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Nvidia jumped to a fresh all-time high Monday as the AI chipmaker presented at CES and investors digested new reports about its business with China. Shares of Nvidia surged more than 4%, to over $514 apiece, which puts the stock on pace for a record close. Nvidia's current all-time high came on Nov. 20, when it hit $504.09 per share. Including Monday's intraday gains, the stock has advanced more than 27% since its recent low on Oct. 26. The S & P 500 is up about 14% during the same timeframe. "I think the company still is very undervalued," Jim Cramer said Monday, alluding to the fact Nvidia was cheaper at the end of 2023 than it was 12 months prior despite the stock more than tripling last year on AI optimism. Nvidia is trading at roughly 24 times forward earnings Monday, compared with its five-year average of 39, according to FactSet data. The Club last week did trim Nvidia and a handful of other 2023 standouts to lock in some profits. But we maintain our long-term belief in the leading AI chipmaker, which rose 239% in 2023. Information technology was the best-performing sector in the S & P 500 on Monday, up 1.8%, helping the overall equity index gain 0.65%. The strength in tech came as the yield on the benchmark 10-year Treasury fell below 4%, a closely watched psychological level. Nvidia is set to begin mass production of AI chips for Chinese customers that comply with the U.S. government's revised export rules on AI technology, Reuters reported Monday , citing sources. The tougher restrictions, which took effect in October, temporarily curtailed Nvidia's ability to sell its coveted AI chips into the important market for the second time in as many years. After the U.S. government implemented exports controls on AI technology in October 2022, Nvidia redesigned its data center chips to meet performance thresholds, allowing the company to resume fulfilling orders for China-based customers. However, some Chinese tech giants such as Alibaba are less enthusiastic about Nvidia's second attempt to make less-powerful AI chips that comply with U.S. rules, The Wall Street Journal reported Sunday , citing people familiar with the matter. Alibaba, known for its e-commerce and cloud-computing platforms, and WeChat owner Tencent have told Nvidia they intended to order fewer of the throttled-back AI chips in 2024 compared with previous plans for the now-illegal processors, The Journal reported. The tech companies are redirecting some of their orders to Chinese firms, such as Huawei, as well as their own custom processors, the newspaper reported Jim downplayed the impact of The Journal report, suggesting Nvidia's less powerful data center chips remain superior to the alternatives. "Give me a break. They'll take anything from Nvidia," he said, adding: "I think the Chinese companies are just going to have to understand this is as good as it's going to get" for them. Sales to Chinese customers have historically represented between 20% and 25% of Nvidia's data center revenue. In the near term, Nvidia has said strong demand for its chips elsewhere in the world will offset the loss of Chinese sales. An inability to access the Chinese market over the long term would hurt the U.S. technology market, the company has said. While we've been encouraged by Nvidia's apparently solid relationship with the U.S. government , we've expressed caution about assuming the company's revenue in China will quickly return to historic levels. Meanwhile, Nvidia's keynote presentation at the CES conference commenced at 11 a.m. ET Monday — a potential source of excitement for investors. The company announced new graphics processing units, or GPUs, for personal computers and professional workstations. The GPUs are designed to "unlock the full potential of generative AI on PCs," Nvidia said in a press release . And major laptop makers including Dell and HP, will be releasing devices that contain the new GPUs, Nvidia said. Nvidia's finance chief Colette Kress also is scheduled to attend a chat hosted by JPMorgan at 11 a.m. ET Tuesday. (Jim Cramer's Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Visitors at the Nvidia booth at the 2023 Apsara Conference in Hangzhou, Zhejiang province, China, on Oct. 31, 2023.

Costfoto | Nurphoto | Getty Images

Nvidia jumped to a fresh all-time high Monday as the AI chipmaker presented at CES and investors digested new reports about its business with China.