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Cramer says don't flee stocks over inflation and Nvidia fears
Jim Cramer told investors to look at potential catalysts, not just risks. He pointed to falling oil prices, Nvidia's buyback path, and Anthropic's IPO as reasons stocks could recover. The CPI came in hot, pushing the Fed toward a December hike.
CNBC’s Jim Cramer said Tuesday that investors should not let a barrage of bad news drive them out of the stock market, arguing that the catalysts for a rebound are being overlooked.
Stocks fell Tuesday after a hotter-than-expected inflation report fueled concerns about a bigger half-point Federal Reserve interest rate hike at next month’s meeting. The Nasdaq dropped 0.74%, while the S&P 500 lost 0.38%, CNBC reported, preventing the indexes from logging three-session win streaks following Thursday’s postelection rout.
The artificial intelligence trade was also under pressure as the Nvidia CEO scandal simmered, despite a bullish valuation bump on the Anthropic IPO. Cramer’s argument is that the market is pricing in everything that can go wrong and nothing that can go right, and that the asymmetry is an opportunity.
The inflation problem
Tuesday’s consumer price index exceeded estimates and sent Treasury yields higher. Dallas Fed President Lorie Logan suggested two quick quarter-point increases may be necessary. Only hours before the CPI print, Fed Governor Christopher Waller supported another quarter-point hike and left the door open to a half-point increase. The market is now fully pricing in a quarter-point rate hike at the central bank’s December meeting, with a 12% probability of a half-point increase, according to the CME FedWatch tool.
The inflation data is the bearish case in one number. If prices are still accelerating, the Fed has less room to pause, and higher rates press valuations lower. The bond market’s reaction was immediate, with yields jumping on the print, and the stock market followed the bond market down. The CPI report is the kind of data that makes investors sell first and ask questions later, because the Fed’s response to inflation is the single most powerful force in financial markets.
Cramer’s counter is that the inflation print is backward-looking, and the forward-looking signals point to disinflation. “If we see oil plummet to $40, which is what the chart of oil refining giant Valero says to me, and you get Walmart and Costco to force price cuts for branded products or make their own excellent house brands for everything, then you are going to see the CPI come down,” he said. Oil dipped under $90 per barrel for the first time since August on hopes for a Middle East detente, CNBC reported.
The Nvidia overhang
Another potential catalyst is Nvidia, despite the uncertainty surrounding CEO Jensen Huang and his affair with an alleged Chinese spy. Cramer said strong earnings, a massive share buyback, and a temporary leave for Huang during an independent investigation, with longtime executive Ian Buck potentially serving as interim CEO, could help restore investor confidence. Nvidia shares sank for a second straight day.
The Nvidia scandal is the overhang that has dragged the entire AI trade lower. Huang is the face of the company and the architect of its strategy, and the allegations against him have raised questions about succession and governance. But Cramer’s point is that Nvidia is not a one-person company. The buyback program and the earnings power are real, and an independent investigation with Huang on leave would give the board time to address the governance questions while the business continues to generate cash. The market is pricing in the worst case, and any resolution that falls short of catastrophe would be a relief.
Buck is the name to watch. He is a longtime Nvidia executive with deep institutional knowledge of the company’s engineering and product roadmap, and if he can hold the operation together while the board sorts out the Huang situation, the market may conclude that Nvidia is more resilient than the scandal suggests. The interim CEO question is about confidence, and a steady hand at the top during the investigation could be enough to stabilize the stock.
The Anthropic IPO
A successful Anthropic initial public offering next week could further revive confidence in the AI trade. According to an updated filing, the Claude developer is set to price the offering on Nov. 18, with trading set to begin the next day. The company could be valued on a fully diluted basis at over $1.4 trillion, up from the $965 billion valuation announced as part of a funding round back in May.
The Anthropic IPO is the catalyst that could change the market’s mood. A $1.4 trillion valuation for an AI company would be a statement that the market for AI infrastructure is still growing, and a successful debut would lift the entire sector. The IPO market has been quiet, and a large, well-priced offering would give investors confidence that the public markets are open for new issues. Anthropic is the second-most-important AI company after OpenAI, and its valuation will be a benchmark for the sector.
Taken together, Cramer said those developments could create a more favorable backdrop for stocks. “The idea of everything going wrong is not in my lexicon,” Cramer said. “We just need a few breaks. I think we will get them.”
What I think
Cramer is making a contrarian call at a moment when the market is spooked, and he is doing it for the right reasons. The CPI was hot, but it is a lagging indicator. The forward-looking signals are oil falling below $90, the prospect of an Iran peace deal, and an Anthropic IPO that could value the company at $1.4 trillion. If those catalysts land in the next two weeks, the market will reprice quickly, and the investors who sold on the CPI print will have sold at the bottom.
The Nvidia situation is the hardest call. Huang’s affair with an alleged Chinese spy is a serious governance and national security problem, and the market is right to discount the stock while it is unresolved. But Cramer’s point about the buyback and the earnings power is valid. Nvidia is generating cash at a pace that few companies in history have matched, and a massive buyback would put a floor under the stock regardless of the governance questions. The interim CEO path with Buck is the cleanest resolution, because it removes Huang from the day-to-day while the investigation runs, and it gives the market a name to trust.
The Anthropic IPO is the wildcard. A $1.4 trillion valuation is aggressive, but the demand for AI infrastructure is real, and Anthropic’s Claude models are competing with OpenAI at the frontier. If the IPO prices well and trades up, it will reset the valuation framework for every AI company, and the sector could rally into year-end. If it prices poorly, the AI trade will have to find another catalyst, and the market may stay in its defensive posture through December.
The Fed is the risk that Cramer is underweighting. Logan and Waller are both signaling openness to more aggressive hikes, and if the December CPI is also hot, the half-point probability will rise above 12%, and the market will have to price in a more hawkish path. Oil at $40 is Cramer’s best-case scenario, and it depends on an Iran deal that is not yet done. The catalysts he is pointing to are real, but they are not guaranteed, and the market’s caution is not irrational. The right trade is to hold positions and wait for the catalysts to arrive, not to sell everything on the CPI print, but not to bet the portfolio on an oil plunge that depends on Qatari mediation succeeding.