CNBC’s Jim Cramer said Thursday that the Iran war is forcing investors to act more like military strategists than stock pickers. But he encouraged investors to ask themselves a series of questions to guide their decision-making while the resolution of the dispute remains uncertain.
“We’re going to turn the whole process on its head and look at what war actually means for people who are just trying to build a portfolio,” Cramer said on “Mad Money” shortly after President Donald Trump announced he was extending a moratorium on bombing Iranian energy facilities until April 6.
“We know we can’t predict the outcome of war, and as tonight’s extension of the bombing moratorium shows, we can’t predict the timing either… but what we can determine is whether the stocks we like have a lot to do with war,” Cramer said.
Nvidia Kramer said this is a “clear” example of using a checklist to help determine whether a stock is worth buying at this time. Shares of the leading artificial intelligence chipmaker have fallen more than 3% since February 27, the last trading day before the outbreak of war.
“The first question you have to ask is, is Nvidia’s stock price because of the war?” Cramer said. In Nvidia’s case, it’s difficult to quantify its direct connection to the conflict, he said. “NVIDIA is a big part of the stock market itself, and it’s the easiest stock to trade in the world. I think the stock price is down because it’s very easy to go back down to lower levels.”
Kramer said interest rates are also a factor to consider, as higher interest rates could increase borrowing costs and ultimately delay data center construction. “However, if the war were to end soon and there was a new Fed chief, he would feel foolish for staying away from Nvidia,” he argued.
Third, Cramer said investors should consider whether there is an underlying reason for NVIDIA’s performance. “There’s a so-called compute shortage in the technology industry right now, and there’s a memory shortage, and that means there’s a shortage of Nvidia-powered computers,” he said. Kramer acknowledged that higher memory prices could indirectly weigh on demand for Nvidia chips, given that servers cost more overall and take more of a customer’s budget. However, he noted that the fundamental demand situation remains strong.
Oil is also a factor, but Kramer isn’t too worried about it. “NVIDIA’s data centers run primarily on natural gas, and natural gas is based in the U.S. and hasn’t changed much,” Cramer said. “Those customers could absolutely be affected, but I’m not concerned because everything we do with Nvidia is considered mission-critical.”
Finally, Cramer said investors need to assess whether demand for NVIDIA products is waning, regardless of the war. “It’s possible that sovereign capital from the Gulf countries is drying up and that’s funding a lot of data centers… but last week I attended the Nvidia GTC conference and saw that the demand was incredibly strong,” he said.
Cramer said he is hesitant to take a big hit on Nvidia’s stock price because if the war drags on, it could cause further declines in Nvidia’s stock in the short term. But if he had to choose, he said he’d rather buy a little earlier than later.
“The end result is an opportunity to buy high-quality stocks at lower prices than you would normally expect,” Kramer added. “You can’t measure time. Remember that.”
Disclosure: Cramer’s Charitable Trust, a portfolio used by CNBC Investment Club, owns stock in NVDA.
