The war in Iran has forced investors to act more like military strategists instead of stock pickers, CNBC’s Jim Cramer said Thursday. However, he recommended investors ask themselves a series of questions to guide their decision-making with the conflict’s resolution still uncertain.
“I’m going to turn the whole process upside down and think about what the war really means to someone who’s simply trying to build a portfolio,” Cramer said on “Mad Money,” shortly after President Donald Trump announced he was extending the pause on bombing Iranian energy facilities to April 6.
“We know we can’t predict the outcome of the war. We can’t predict the timing either as tonight’s bombing pause extension shows … But what we can gauge is whether the stocks we like have much of a connection to the war,” Cramer said.
Nvidia is an “obvious” example where utilizing a checklist can help determine if the stock is worth buying in this moment, Cramer said. Shares of the leading artificial intelligence chipmaker are down a little over 3% since Feb. 27, the last trading day before the war broke out.
“First, we have to ask, is Nvidia’s stock down because of the war, ” Cramer said. In Nvidia’s case, its direct ties to the conflict are difficult to quantify, he said. “Nvidia is a big part of the stock market itself and so it’s the easiest stock in the world to trade. I think it’s going down because it is so easy to get back in at a lower level.”
Interest rates are another factor to consider, Cramer said, since higher rates could raise borrowing costs, ultimately slowing the data center buildout. “That said, if the war ends soon and we have a new Fed chief, you’ll feel like a moron for staying away from Nvidia,” he argued.
Third, Cramer said investors need to consider whether there are intrinsic reasons for Nvidia’s performance. “Right now, the tech industry is short on what we call compute and its also short on memory. That means it’s short the computers that have Nvidia inside,” he said. Cramer acknowledged that sky-high memory prices could indirectly weigh on demand for Nvidia’s chips, given the overall cost of the servers will be higher and consume more of customers’ budgets. But the fundamental demand picture is still strong, he noted.
Oil is also a factor, though Cramer isn’t too concerned about it. “Nvidia’s data centers run mostly on natural gas, which is U.S.-based and has barely budged,” said Cramer. “Its customers could be impacted absolutely, but everything you use Nvidia for is considered mission critical, so I’m not concerned.”
Lastly, Cramer said that investors need to find out if there’s a weakening demand for Nvidia products regardless of the war. “It’s conceivable that sovereign capital from the Gulf is drying up and that’s financed a lot of data centers … But last week I attended the Nvidia GTC conference and I learned that demand is incredibly strong,” he said.
Cramer said if the war drags on, there could be more downside for Nvidia shares in the near term, so he’s hesitant to pound the table on the stock. But, if forced to choose, he said he’d rather be a little early in buying rather than be late to the rally.
“You’re ultimately being given a chance to buy a high quality stock at a lower price than you’d normally expect,” Cramer added. “You can’t time it. Don’t forget that.”
Disclosure: Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club, owns shares of NVDA.
