Jim Cramer Warns ‘More From China Could Spell Trouble for NVIDIA Corporation (NVDA)’

On February 1, 2025, Jim Cramer discussed the implications of lower AI development costs on NVIDIA Corporation (NASDAQ:NVDA) during his appearance on CNBC’s Squawk on the Street. Cramer expressed concerns that the recent selloff in AI-related stocks, driven by China’s DeepSeek AI models, could signal a shift in investor expectations regarding AI spending.

Cramer noted that since the AI boom began in November 2022, businesses have invested heavily in AI GPUs and data centers. The recent decline in data center stocks, which saw a loss of a trillion dollars in value, raised questions about whether lower AI costs would affect future spending. Cramer acknowledged that while some investors are worried, others see an opportunity for broader access to AI development due to reduced costs.

He categorized investor sentiment into three groups: those who continue to order GPUs despite lower costs, those who are pulling back, and those who are skeptical about the value of leading AI stocks. Cramer emphasized that the potential for a paradigm shift in AI spending could be indicated by a lack of GPU order pullbacks, which he has not yet observed.

Regarding NVIDIA specifically, Cramer expressed that the perception of increased competition from companies like DeepSeek could negatively impact NVIDIA’s market position. He stated, “More chips, more people who know how to use them… means less for NVIDIA.” He also mentioned that the company’s shares have dropped 12.6% recently, reflecting investor recalibration of AI spending expectations.

In summary, Jim Cramer remains cautious about NVIDIA Corporation’s future in light of changing AI development costs and investor sentiment. He continues to monitor the situation closely, indicating that the current market dynamics could lead to significant shifts in AI spending and demand for GPUs.