Investors troubled by the recent selloff in Nvidia and other artificial intelligence (AI) stocks are adopting a misguided approach to the market, according to CNBC’s Jim Cramer. He emphasized that successful investment in AI companies hinges on conviction; if investors lack that commitment, there are alternative, safer stocks available.
Cramer expressed concern that many traders view market dynamics purely as a zero-sum game. They tend to purchase shares only after significant price increases and sell immediately at the first sign of a downturn. This mindset has resulted in many missing out on considerable gains throughout the past decade due to their inability to withstand volatility or to have faith in the companies they invest in.
His long-term endorsement of the “Magnificent Seven,” consisting of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, stems from their sustained success, impressive profitability, and remarkable adaptability in the face of market challenges. Cramer pointed to Tesla as a critical example; the company faced heightened competition and narrowed margins but did not waver. Instead, their stock rebounded once investor sentiment shifted to focus on advancements in self-driving technology and robotics.
Currently, Nvidia is experiencing its own period of skepticism, exacerbated by fears that Alphabet is shifting toward its proprietary AI chips, produced in collaboration with Broadcom, rather than relying solely on Nvidia’s renowned processors. News that Meta may also adopt Google-designed chips contributed to Nvidia’s stock price decline, even following a strong earnings report, which saw shares plummet into the mid-$180s.
While Cramer acknowledged the validity of these concerns surrounding Nvidia, he cautioned against making the same errors he experienced with Alphabet, which he sold before its stock price surged. He advised that if investors do not have confidence in Nvidia, they are under no obligation to retain their shares, encouraging a thoughtful approach rather than impulsive reactions to market shifts.