Jim Cramer Critiques China's Restrictions on Nvidia

Jim Cramer has taken a strong stance against the potential restrictions placed on Nvidia Corp. (NYSE: NVDA) in China, labeling the reports of regulatory challenges as "pathetic."

What Happened: In a recent post on X, Cramer questioned the rationale behind limiting access to Nvidia's advanced chips, stating, "Like China would ban the best of the best? Really?"

This criticism emerges amid rising tensions between the United States and China, particularly in the semiconductor technology sector. China's National Development and Reform Commission has introduced new energy efficiency regulations that might restrict local companies from acquiring Nvidia's specialized H20 processors.

While Cramer acknowledged the increasing challenges Nvidia is facing, he expressed confidence in the company's CEO, Jensen Huang, believing he will successfully navigate these obstacles.

Reports from the Financial Times indicate that these new regulations could hinder major Chinese technology firms, such as Alibaba Group Holding Ltd. (NYSE: BABA) and Tencent Holdings Ltd. (OTC: TCEHY), from utilizing Nvidia's chips. This development poses a significant threat to Nvidia's $17 billion annual revenue from China, which is currently its fourth-largest market.

In response to ongoing criticisms, Cramer emphasized on his social media, "Like every day, the Long Knives are out again for Nvidia. Today’s bear: link says that Nvidia's chips violate Chinese environmental rules. Pathetic…"

Cramer further asserted, "The forces against Nvidia are numerous. But Jensen can handle it. The world, including China, needs more computing power. You can't achieve that without Nvidia. It's laughable to think China would ban the best of the best."

He also posed a rhetorical question about what alternatives China might have to replace Nvidia’s chips, suggesting that the logic behind such restrictions was flawed. Cramer remarked, "Sure, the country that builds endless amounts of coal plants is going to cut its nose off to spite its face? Just plain dumb."

Why It Matters: Cramer highlighted the essential nature of Nvidia’s technology, stating, "The world, including China, needs more computing power. You can’t do it without Nvidia." He further critiqued China's capability to find replacements for Nvidia’s advanced chips, suggesting that the proposed restrictions could be counterproductive.

Nvidia appears to remain resilient despite these challenges, with plans to engage with commission chair Zheng Shanjie to devise compliance strategies with the new regulations. The company's recent financial performance reflects its strong position in the market, reporting fourth-quarter revenue of $39.3 billion, marking a 78% increase, with expectations of first-quarter revenue reaching $43 billion.

As domestic competitors like Huawei Technologies Co. continue to advance their AI chip capabilities, the semiconductor landscape is evolving, showcasing a high-stakes technological battle between global powers.

Price Action: Nvidia's stock traded at $113.76 on Wednesday, reflecting a 5.74% drop, and fell further to $112.21 in after-hours trading, down 1.36%.

Although Nvidia is excelling in growth and momentum when compared to Intel Corp (NASDAQ: INTC) and Advanced Micro Devices Inc (NASDAQ: AMD), it trails in valuation metrics according to Benzinga Edge rankings.

Cramer, Nvidia, China