Nvidia is in a tough spot as CEO Huang warns of rising Chinese competition on AI
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: Stocks are lower on Wednesday, though they've recovered from their session lows. Disappointing corporate earnings and lackluster economic data are pressuring the S & P 500 , potentially ending its six-session winning streak. Given the overbought S & P Oscillator over the past three sessions, the market may have been due for a bit of breather or pullback. The weak economic data is helping traditional defensive stocks outperform, with sectors like consumer staples and health care trading higher. On the flip side, sectors with greater economic sensitivity like consumer discretionary and energy are weaker. Oil's drop below $60 per barrel puts the commodity on pace for its biggest percentage decline since November 2021. The next few days will be an important test for the market as we eagerly await the earnings of several Magnificent 7 members as well as potential news on trade deals and the all-important April non-farm payrolls report out Friday before the bell. Warning shot: Nvidia CEO Jensen Huang on Wednesday offered up some frank words about China's competitiveness in artificial intelligence, at a time of intense geopolitical pressure on the Club-owned chipmaker's business. Huang made the comment to media outlets, including CNBC , on Capitol Hill, and he'll be at the White House later Wednesday. Here's a transcript of what Huang had to say, with paraphrased questions in bold. Question: What is your reaction to a story about Chinese tech giant Huawei's efforts to launch a new AI chip that it hopes will exceed the performance of Nvidia's prior-generation H100? Huang: There's no question that Huawei is one of the most formidable technology companies in the world. They're incredible in computing. They're incredible in networking technology and software capabilities — all of the essential capabilities to advance AI, and they have. They've made enormous progress over the last several years. Whatever policy the administration puts together really should enable us to accelerate the development of AI, enable us to compete on a global stage. Question: How far behind do you think China is? Huang: China is not behind. Question: Are they ahead of you? Huang: China is right behind us. We're very, very close. Remember, this is a long-term, this is an infinite race. In the world of life, there's no two-minute end of the quarter. There's no such thing. We're going to compete for a long time. Just remember, this is a country with great will, and they have great technical capabilities. Fifty percent of the world's AI researchers are Chinese. So, this is an industry that we're going to have to compete for. What's our takeaway from these remarks? Nvidia finds itself in a tough spot in the game of geopolitics. The Biden administration curtailed Nvidia's ability to compete in China with various restrictions that limited the performance of AI chips it could send to customers in that market. While Nvidia developed throttled-back versions that ended up selling well in China, the Trump administration put tougher restrictions in this place this month, forcing Nvidia to book a $5.5 billion inventory charge for its made-for-China H20 chips on April 15. Another negative headline on this front arrived Tuesday, when Reuters reported that the Trump administration was weighing changes to a Biden directive — set to go into effect in May — that created global licensing requirements for AI chips, grouping countries into tiers to effectively determine how much computing power they could get. When they were announced in January, shortly before Biden left office, Jim blasted the "AI diffusion rules" as absurd. Among the changes being considered by the Trump White House, according to Reuters, is replacing the tiers with government-to-government agreements. "The diffusion rules as written were already non-ideal; such a change would be clearly worse," Bernstein analysts wrote in a note to clients Wednesday. Of course, this is a fluid situation — the Reuters story emphasized that nothing was set in stone — and the specific risks to Nvidia could change. Nevertheless, add it all up and the geopolitical landscape is exactly why Jim Cramer decided to book profits in the stock last week and recommended Club members do so even sooner . Having profits in hand makes handling all these fast-moving headlines a bit easier. Up next: We have a busy night of earnings ahead. Meta Platforms and Microsoft are scheduled to report along with Qualcomm , eBay , Robinhood , MGM Resorts , Align Technology , Public Storage , CH Robinson , KLA Corp , Tanger , Prudential , and many more. Thursday is a big day too. Eli Lilly and Linde will report their quarterly results along with McDonald's , CVS Health , Biogen , Harley-Davidson , Hershey , Shake Shack , Sirius XM , Intercontinental Exchange , Mastercard , Air Products , Estee Lauder , KKR , Cardinal Health , and more. On the data front, we'll see a job cuts report from recruiter Challenger, initial jobless claims, and April ISM manufacturing report. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. Nvidia CEO Jensen Huang speaks during the Hill & Valley Forum at the US Capitol Visitor Center Auditorium in Washington, DC, on April 30, 2025.
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.
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