Jim Cramer Critiques China's Restrictions on Nvidia, Supports CEO Jensen Huang

Jim Cramer has criticized the possible restrictions on Nvidia Corp. (NVDA) in China, labeling the reports of regulatory hurdles as "pathetic."

What Transpired: In a recent post on X, Cramer questioned the rationale behind restricting access to Nvidia’s cutting-edge chips by stating, "Like China would ban the best of the best? Really?"

This critique comes at a time when tensions between the United States and China are escalating in the semiconductor technology realm. China's National Development and Reform Commission is implementing new energy efficiency regulations that could hinder Chinese companies from procuring Nvidia's specialized H20 processors.

Cramer recognized the challenges Nvidia is encountering but expressed confidence in CEO Jensen Huang's capability to navigate through these difficulties successfully.

According to a report from the Financial Times, these regulations may limit major Chinese tech companies, including Alibaba Group Holding Ltd. (BABA) and Tencent Holdings Ltd. (TCEHY), from using Nvidia’s products. This situation poses a threat to Nvidia’s substantial $17 billion annual revenue from China, which stands as its fourth-largest market.

Cramer stated, "The forces against Nvidia are rampant. But Jensen can manage it. The world, including China, requires more computing power. It's impossible to achieve that without Nvidia. Like China would really choose to ban the best of the best?"

He further added, "What alternatives do the Chinese have to replace Nvidia chips? Their new chips are among the least efficient. It amuses me how these reports circulate. Is it logical for the country that builds endless coal plants to cut off its nose to spite its face? It’s just plain foolish."

Importance of the Matter: Cramer highlighted the essential nature of Nvidia’s technology, asserting, "The world, including China, needs more compute. You can’t do it without Nvidia." He also questioned China's ability to substitute Nvidia's advanced chips, indicating that such restrictions would be detrimental to their own interests.

Nvidia remains steadfast amidst these challenges, planning to meet with commission chair Zheng Shanjie to explore ways to comply with the new regulations. The company's recent financial results reflect a robust market position, with fourth-quarter revenue soaring to $39.3 billion, marking a 78% increase, and projecting first-quarter revenue of $43.0 billion.

As domestic competitors like Huawei Technologies Co. continue to enhance their AI chip capabilities, the semiconductor industry is undergoing significant transformations amid this high-stakes technological contest between global powers.

Market Response

On Wednesday, Nvidia shares traded at $113.76, reflecting a decline of 5.74%, and fell further to $112.21 during after-hours trading, marking a 1.36% decrease.

While Nvidia demonstrates higher growth and momentum compared to Intel Corp (INTC) and Advanced Micro Devices Inc (AMD), it lags in valuation metrics according to the latest rankings.

Nvidia, China, Semiconductors