Jim Cramer Notes That Companies Like Nvidia Earn Their Premium Through Results

NVIDIA Corporation (NASDAQ:NVDA) is one of the latest stocks on Jim Cramer’s radar. Cramer explained why the stock deserves a premium. He stated:

“The average stock in the S&P 500 currently trades at 23 times next year’s earnings. These data center stocks tend to trade at a premium to that level… NVIDIA’s at around 30 times next year’s numbers… But remember, some stocks deserve to get a higher premium. I mean, come on, companies aren’t equal. Some are better than others. The ones that I just mentioned are better than others.

Now, if these companies keep growing faster than expected, then we might look back and realize that they were cheap in retrospect. And that’s what happens when you beat the estimates. And I lay all this out in How to Make Money in Any Market with regard to Nvidia, as the stock of Nvidia always looks expensive on the earnings estimates. But then they beat those estimates, they clobber those estimates, and we all realize that the stock turned out to be much more of a bargain than we thought time and again.”

NVIDIA Corporation (NASDAQ:NVDA) provides computing, graphics, and networking solutions, including AI, data centers, gaming, professional visualization, and automotive technologies.

While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.