If you think Nvidia is cheap and the data center isn't spent then own it, says Jim Cramer

Key Concepts:

• Tariffs and their impact on domestic vs. international businesses
• Service-based companies as potential winners in a tariff environment
• Data center stocks and their recent decline
• Nvidia's bear attack: White House concerns, Chinese pollution controls, Death Cross formation, zero-day options
• Nvidia as a "wavy inflatable tube man" (air dancer)
• Importance of understanding why you bought a stock in the first place
• High multiple stocks and their vulnerability to market downturns

1. Tariffs and Market Impact

• President Trump announced a 25% tariff on all cars made outside the US, which is considered a tougher stance than anticipated.
• Tariffs are likened to taxes and can significantly cut into company profits.
• The market reacted by favoring domestic companies, especially those in the service sector, while penalizing companies with large international businesses.
• The Dow slipped 133 points, the S&P lost 1.12%, and the Nasdaq tumbled 2.04%.

2. Winners in a Tariff Environment: Service-Based Companies

• Cintas: A uniform rental company that also provides facility accessories, reported better-than-expected revenue growth and the highest gross margins in its history. CEO Todd Schneider stated that their value proposition continues to resonate despite market uncertainty. Cintas focuses on small and medium-sized businesses and is not significantly impacted by tariffs.
• Paychex: Manages payrolls and offers services to small and medium-sized US businesses, making it largely unaffected by tariffs.
• Dollar Tree: Reported good numbers and is divesting from Family Dollar. They stated they can mitigate a lot of the costs associated with tariffs, despite a significant portion of their merchandise coming from China.
• Molina Healthcare: A domestic health insurer working with state governments, has no exposure to tariffs, contributing to its stock rally.

3. Losers: Data Center Stocks and Nvidia

• Several stocks connected to the data center experienced declines, including Super Micro, Arista Networks, and Broadcom.
• Nvidia was at the epicenter of the sell-off, declining nearly 6%.
• Rumors of Microsoft canceling data center builds contributed to the negative sentiment. However, Cramer suggests that Microsoft may simply be making OpenAI pay for its own computing power.
• The market is currently skeptical about the AI-powered industrial revolution, leading to a broad sell-off in the sector.

4. Nvidia's "Nuclear Bear Attack"

• Nvidia is facing a "nuclear bear attack" due to several factors:
  • White House Concerns: There are concerns that President Trump may impose even stricter limitations on Nvidia's chip sales to certain countries.
  • Chinese Pollution Controls: A Financial Times story claimed that Nvidia's chips ran afoul of Chinese pollution controls, which Cramer found surprising.
  • Death Cross Formation: Nvidia's 50-day moving average plunged below its 200-day moving average, a bearish technical signal.
  • Zero-Day Options: Traders are placing large bets against Nvidia using zero-day options, creating a self-fulfilling bear raid.

5. Nvidia Strategy and Analogy

• Cramer advises Nvidia investors to consider why they initially bought the stock. If they believe in the AI-powered industrial revolution and Nvidia's role in it, they should understand the current market dynamics.
• Cramer describes Nvidia's stock as trading like a "wavy inflatable tube man" (air dancer), indicating its volatility and susceptibility to market sentiment.
• He suggests giving the stock "room" to come down and not fighting the current bearish trend.
• Nvidia is seen as the "linchpin" of a group of stocks (Marvell Tech, Broadcom, GE Vernova, Vistra), and its struggles are affecting the entire group.

6. Viewer Questions and Stock Analysis

• Regeneron, Elf, Chipotle: Chipotle is trading at a high multiple (38 times earnings) and is likely to be affected by tariff news. However, it is a stock to consider buying after the news is digested.
• On Holdings: Cramer likes On Holdings and has recommended it in the past. He advises waiting for the stock to come down before buying, given the current market conditions.

7. Upcoming Segments

• Analysis of Korea's IPO.
• Interview with the CEO of Paychex regarding the state of small businesses.
• Discussion of Dollar Tree's divestiture of Family Dollar.

8. Notable Quotes

• Todd Schneider (CEO of Cintas): "There is some uncertainty in the marketplace which we are carefully monitoring, but our value proposition continues to resonate."
• Cramer: "My mission is simple: to make you money."
• Cramer: "Nvidia is being subject to nothing less than a nuclear bear attack, and the radiation burns are scaring shareholders."
• Cramer: "I think the stock trades like a wavy inflatable tube man, also known as an air dancer. Not exactly the Statue of Liberty."

9. Technical Terms

• Tariffs: Taxes imposed on imported goods.
• Gross Margins: The percentage of revenue remaining after deducting the cost of goods sold.
• Death Cross: A bearish technical pattern that occurs when a stock's 50-day moving average falls below its 200-day moving average.
• Zero-Day Options: Options that expire on the same day they are purchased.
• Put Option: An option that gives the holder the right to sell an asset at a specified price.
• Shorting: Borrowing a stock and selling it, with the expectation of buying it back at a lower price.
• High Multiple Stock: A stock with a high price-to-earnings ratio, indicating that investors are paying a premium for each dollar of earnings.

10. Synthesis/Conclusion

The market is reacting negatively to new tariffs, favoring domestic service-based companies while punishing companies with significant international exposure. Data center stocks, particularly Nvidia, are facing a severe downturn due to a combination of factors, including White House concerns, Chinese pollution control issues, and bearish technical signals. Cramer advises investors to understand the reasons behind their investments and to be cautious in the face of market volatility, especially with stocks like Nvidia that are currently trading like a "wavy inflatable tube man." He suggests waiting for the market to digest the tariff news before making new investments in high-multiple stocks.