Nvidia, a leading player in the AI chip market, faces a tumultuous week as its shares plummet by 16% amid concerns about DeepSeek. Jim Cramer's Charitable Trust, which holds significant positions in Nvidia (NVDA) and Meta Platforms (META), remains steadfast despite market volatility. As Nvidia grapples with valuation questions, CEO Jensen Huang asserts the company's demand is "insane," reflecting the robust appetite for its products. However, the stock's recent performance raises questions about its future trajectory.
Investor caution has emerged due to potential pauses in tech customers' spending on accelerated computing and generative AI. The Chinese invention from DeepSeek has further fueled concerns among Nvidia's major customers. These factors have contributed to Nvidia's shares reversing a modest gain for 2025 into a 10% year-to-date decline within a single week. Despite this, market analysts maintain that Nvidia should be "owned, not traded," underscoring the company's long-term potential.
Nvidia's valuation has been a topic of debate, particularly given its history of substantial gains. The company witnessed a surge of over 170% in 2024 following a nearly 240% increase in 2023. At one point, Nvidia boasted the largest valuation globally. Yet, questions about its valuation persist, especially with the potential for a large customer to pause orders of Nvidia's latest expensive chips from the new Blackwell platform. Such a scenario could result in another 10% decline in the stock.
The AI chipmaker's significant market capitalization has prompted discussions about its position in investors' portfolios. Jim Cramer noted that Nvidia's position remains too large relative to its stock gains and market capitalization accumulation over recent years. Despite these concerns, Nvidia continues to be a major player for the CNBC Investing Club with Cramer.
Tesla's recent hint at ordering hundreds of thousands of Nvidia chips for powering neural networks in self-driving electric vehicles underscores Nvidia's critical role in advancing AI technology. Several companies, including Meta Platforms, acknowledge that to lead in AI, they must invest substantially in Nvidia's offerings. This underscores the company's strategic importance to customers aiming to dominate the AI landscape.
Nvidia's latest chips, while powerful, come at a high cost, particularly those in the Blackwell platform. These pricing concerns have caused apprehension among some customers, potentially impacting future orders and, consequently, the company's stock performance. However, Nvidia's leadership remains confident in its ability to navigate these challenges and capitalize on growth opportunities.