It's not too late to buy Nvidia. Here are the reasons we say 'own it, don't trade it'

Want to start an Nvidia position but think it's too late? The stock hit an all-time high on Thursday and has quickly dropped 7% since then. We know that Nvidia can swing wildly in the near-term. With earnings coming up on Wednesday evening, we feel that a "beat and raise" quarter is the minimum requirement. It's been the bar for years now, as we wrote in Sunday's earnings preview . Even if that bar is cleared, there are so many moving parts that there's no telling where the stock might trade after the release. We tend to like it when a hot stock cools off a bit ahead of the print. How does that line up with Jim Cramer's column from a couple of weeks ago, when he wrote about the reasons why it might not matter if you are "late" in buying stocks tied to the secular artificial intelligence boom? Listen to Nvidia CEO Jensen Huang talk about AI being the fourth industrial revolution, and the next leg of agentic AI needing 100 times more computing power than currently available, and it might still be early. And, Amazon CEO Andy Jassy? He told Jim earlier this month that investors will reap rewards from all the company's AI spending. It's generally not our style to chase stocks near record highs, nor do we love buying a stock right into an earnings release — even if you're right on the numbers, the price reaction is too hard to game. However, for those without an Nvidia position on the books currently, here is where we stand. During Monday's Morning Meeting, Jim said, "If you wanted to buy some here, I totally endorse it. I just feel that we own it, we don't wanna trade it." Sure, it's hard to think it's anything but late when Nvidia and other stocks have exploded higher in the past three years. But, to never start a position because you are worried that you missed rallies that have already transpired, when the long road ahead looks primed to run, would violate No. 13 on Jim's list of investing rules, "No woulda, shoulda, coulda." If you have not started a position in Nvidia yet, don't let your past inaction prevent you from getting on board. Jim has repeatedly and openly talked about mistakenly exiting Alphabet in March 2025 on concerns about AI and federal litigation. It quickly became apparent that AI was not a problem, and neither was the government. The Club re-initiated a position in the Google parent in late December 2025 after a huge run higher. We built it up over time, and we're sitting on unrealized gains of 30%. We think that's only the beginning. Owning the past mistake and recognizing that Alphabet was on a winning path was not easy. But it was necessary. Back to Nvidia, from a valuation perspective, there really isn't much to debate. Compared to peers, the stock is clearly undervalued from a price-to-earnings standpoint. Forward earnings-based valuations, Broadcom (also a Club name) trades at 28 times, Marvell at 39 times, Advanced Micro Devices at 44 times, and Intel at 86 times. Nvidia clocks in at only 24 times forward earnings, despite being the name at the heart of the entire AI trade. It has more tentacles than any other company, thanks to a streak of high-profile investments into both key data center suppliers and customers. The issue, as we see it, is given the material valuation discount to peers, expectations for continued earnings growth, and an earnings catalyst on the near-term horizon, should you continue to wait before buying? Warren Buffett once said, "Investing is simple, but not easy." The simple part is the idea that you can teach pretty much anyone the mechanics of investing, or how to read financial statements or stock charts. What's not easy is controlling your emotions and maintaining discipline. That's arguably the single most important factor to being a successful investor over the long-term. I don't care who you are; it is not easy to watch a name you believe in lose over one-third of its value in a short period of time, as we saw with our cybersecurity holdings earlier this year. It's even more difficult to do what you know you must when the stock is doing the opposite of what you believe the fundamentals dictate, buy more. That's what we did. We bought CrowdStrike twice when the stock was being hit in February and March . The market has finally come around to our way of thinking that AI won't reduce the need for cybersecurity but increase it. On Monday, we trimmed CrowdStrike to protect some of those hard-fought gains. One way to keep your emotions in check is to examine the risk-reward. Nvidia is viewed by many as being a frontrunner to reach the fabled $10 trillion market cap, which implies some 82% upside from here. NVDA YTD mountain Nvidia YTD Technical analysis puts potential support somewhere in the $217 range (the old high), based on the Polarity Principle (old resistance once overcome, turns into support), which represents a little over 2% downside. So, now you need to consider your longer-term outlook. If you are with us in the camp that this name can be worth $10 trillion one day, then you aren't concerning yourself with trying to pick up the stock some 2% cheaper because you don't nitpick and try to be cute when it comes to a roughly 1:40 risk to reward ratio (which is what you're looking for when you expect to see support 2% below the current price but think shares could trade up over 80% in coming years), you can buy it. If the market gives you an even better setup a week from now (on the assumption we are making that Nvidia isn't about to derail the train they are driving), you buy that too because you've left yourself some room to do so. Even if the downside proves to be a bit more than expected, the relative valuation versus peers and versus Nvidia's own historical valuation range, along with the potential upside, dictates that you've got a solid margin of safety at current levels. With a small position, you can hope for rips to the upside and take solace in the fact that making some money is better than making nothing. On the other hand, if it moves lower, you can take solace in the idea that the near-term decline only serves to boost the longer-term gains thanks to the reduced overall cost basis you'll achieve by stepping in to buy the weakness. Bottom line The fundamental reasons to own Nvidia, and not trade it, are three-fold: It's cheaper than its peers, still growing rapidly, and is now breaking out from a long-period of consolidation. We have not heard a single comment all earnings season from hyperscalers to suggest that demand has done anything other than strengthen in recent months. And, with billions upon billions already invested, Alphabet , Amazon , Microsoft , and Meta Platforms revealed alongside earnings at least $695 billion of capital expenditure plans for this year, a 14% increase from the previous estimate of $608 billion. We expect Nvidia to get its fair share. The decision to buy Nvidia ahead of Wednesday evening's earnings, if you don't have a position, is up to you. But, considering our argument that Nvidia would be great in any portfolio, even at current prices, there is probably no wrong answer. (Jim Cramer's Charitable Trust is long NVDA, AVGO, GOOGL, AMZN, META, MSFT, CRWD. See here for a full list of the stocks.) 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.