We recently published a list of 10 Stocks Jim Cramer Thinks Will Skyrocket. In this article, we take a look at where ARM Holdings (NASDAQ:ARMH) stands compared to the other stocks that Jim Cramer believes are set to soar.
In a recent episode of Mad Money, Jim Cramer reflects on the remarkable performance of Wall Street’s favorite GPU maker and its current status in the stock market. After the sharp decline three weeks ago caused by the sudden sell-off related to the yen carry trade, the market is recovering.
“We have seen a remarkable recovery from the lows three weeks ago, when we realized that the forced selling caused by the implosion of the yen carry trade was only temporary.”
Cramer points out that the Federal Reserve’s upcoming rate cuts should help this recovery. However, Wall Street has become more selective, and now that the market has recovered significantly, investors are less forgiving of mediocre results.
“Now the Fed is our friend again because it will cut interest rates, starting with the Federal Open Market Committee meeting next month. At the same time, Wall Street has become a bit more demanding after such a spectacular rally. Once we reach higher levels, investors are no longer willing to let companies get away with less than stellar results. That’s what happens – the euphoria wears off. Now we are in a delicate situation that feels like a race against time.”
Cramer stressed that the current economic climate is uncertain. The economy is weakening and although the Fed’s rate cuts are expected to help, their effects are unpredictable. The effectiveness of these measures and the extent of the economic downturn are still unclear.
“Although the economy is slowing and we know the Fed’s rate-cutting cavalry is coming to the rescue, we simply don’t know how effective it will be and how bad things will get before Fed Chairman Powell manages to turn the tide – and he will. We need to figure out how quickly the economy will deteriorate and how quickly the rate cuts will take effect. Both are judgment calls, and we don’t necessarily have enough data to decide one way or the other. We never do that at this point in the so-called business cycle.”
Jim Cramer: In my 43 years on Wall Street, I have never seen anything like this
According to Cramer, Nvidia has attracted extraordinary attention from investors. He describes the company as a game-changing company that is now valued at $3.2 trillion, a dramatic increase from $580 billion just 18 months ago. Cramer emphasizes the company’s dominance in the semiconductor industry and its influence on technology, particularly in the area of artificial intelligence.
“I looked for analogies and found something divine to describe this incredible $3.2 trillion company, which was worth just $580 billion 18 months ago. It has captivated not only investors but people far removed from the stock market. It’s almost a miracle how many have had life-changing experiences because of this one stock.”
Despite the impressive achievements, Cramer notes that the stock’s performance will be closely scrutinized, noting that the company’s quarterly results will need to exceed high expectations, including significant revenue growth and strong future prospects.
“But tomorrow the stock will go into the abyss, and I feel obligated to explain why. Why does it have such high status, and why can it never fully live up to the hype surrounding its $3.2 trillion market cap based on just one quarterly report? This quarter is about beating earnings estimates, beating revenue numbers, and beating forecasts. The stock has gone so high that it needs a $2 billion top line and guidance that’s $2 billion higher than expected, along with an upbeat conference call discussing a strong roadmap. And let’s not forget a gigantic buyback because the company has too much cash sitting idle.”
Cramer concludes that the company’s technology is so advanced that it’s difficult to fully assess its future potential. Nonetheless, he believes the company’s successes should be celebrated and that the stock could still deliver significant upside surprises.
“The bottom line is that I don’t want to be poetic, but it stands out in a way that is unparalleled. We should celebrate its successes and experience positive surprises.”
Our methodology
In this article, we examine a recent episode of Jim Cramer’s Mad Money, where he highlighted ten stocks with strong growth potential. We also analyze hedge funds’ views on these stocks and rank them by hedge fund ownership, from least to most.
At Insider Monkey, we are obsessed with the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A technician in a lab coat carefully tests a modern semiconductor device.
ARM holdings (NASDAQ:ARMH)
Number of hedge fund investors: 38
Jim Cramer is positive on ARM Holdings (NASDAQ:ARMH), noting that the company’s business is showing strong growth despite a significant decline in the share price. He believes that while investors are excited about
NVIDIA Corporation
(NASDAQ:NVDA) offers ARM Holdings (NASDAQ:ARMH) a good buying opportunity, especially if NVIDIA reports positive numbers.
“I like ARM. This stock has fallen sharply, and yet I believe the business is actually gaining momentum. I think people are waiting impatiently for NVIDIA right now, but ARM is a great stock to buy if NVIDIA reports good numbers.”
ARM Holdings (NASDAQ:ARMH) is an attractive investment opportunity due to its dominant position in the semiconductor industry and its growing market reach. Known for its energy-efficient and high-performance processor designs, ARM Holdings (NASDAQ:ARMH) has built a significant presence in mobile devices, including smartphones and tablets. ARM Holdings’ (NASDAQ:ARMH) technology is now expanding into emerging markets such as automotive, the Internet of Things (IoT), and data centers, creating new revenue opportunities.
This diversification is in line with strong industry trends as demand for ARM Holdings’ (NASDAQ:ARMH) efficient chips grows with advances in AI, edge computing, and connected devices. Strategic partnerships with major technology companies and ongoing investments in R&D further strengthen ARM Holdings’ (NASDAQ:ARMH) market influence and ability to innovate. Its business model based on licensing technology and collecting royalties ensures a steady and scalable revenue stream.
Total ARMH 4th place on our list of stocks Jim Cramer believes will skyrocket. While we recognize ARMH’s potential as an investment, our belief is that AI stocks that fly under the radar promise higher returns and do so in a shorter time frame. If you’re looking for a promising AI stock that trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
