CNBC Investing Club lowers Nvidia rating, weighs adding to Constellation Brands
Markets are under pressure on Tuesday after a hotter-than-expected consumer price index lifts bond yields and revives concerns about the pace of Federal Reserve tightening. Against that backdrop, CNBC Investing Club is cutting its rating on Nvidia while keeping watch for a potential opportunity to add to Constellation Brands.
Highlights
- Nvidia lowered to a hold-equivalent 2 rating by CNBC Investing Club after a nearly 10% decline this week and ongoing CEO investigation.
- Crude oil dropped below $90 a barrel for the first time since August, potentially reducing inflation pressure and signaling October as the last bad CPI print if energy prices hold.
- CNBC Investing Club considers increasing Constellation Brands exposure due to lower oil prices, but will wait for a stock decline to improve cost basis before buying.
Portfolio moves after inflation data
As reported by CNBC Investing Club, the portfolio is lowering Nvidia to its hold-equivalent 2 rating from a 1 as managers say the chipmaker's nearly 10% two-session decline this week is not enough to make the stock a buy.Portfolio director Jeff Marks says the club is staying in a holding pattern until it becomes clearer what may happen after Nvidia's board investigates allegations involving CEO Jensen Huang. Jim Cramer says putting Huang on leave during an investigation is standard practice, but adds that Nvidia is not handling the situation in an orderly fashion, which is contributing to the stock's sharp decline.
Cramer also says falling oil prices could ease some inflation pressure. He points to crude dropping below $90 a barrel for the first time since August, amid hopes of de-escalation in the Iran war, and says that could make October the last bad CPI print if lower energy prices continue to feed through.
Shift toward non-tech holdings
Even before the latest revelations around Huang, the club says concerns about a slowdown in data center buildout following key Democratic midterm wins are already adding turbulence to the market. Cramer says he wants the portfolio to get smaller in data center exposure and bigger in non-tech names, repeating a view he also shared at the club's annual meeting on Friday.That repositioning includes interest in building up Constellation Brands, the maker of Modelo and Corona. The investment case is that lower oil prices could leave consumers with more money to spend, although Cramer says he is not ready to buy more shares yet and wants to see the stock decline further to improve the portfolio's average cost basis before any meaningful rally.
As a reminder, we recently covered AI data center financing risks that could slow the U.S. infrastructure buildout.
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