Jim Cramer dumped Broadcom over an $80 billion debt raise, then waved off the identical financing practice at NVIDIA days before the chipmaker's earnings.
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Jim Cramer defends Nvidia's $80 billion debt raise as earnings loom
NVIDIA reports Q2 earnings after the close, consensus at $92 billion revenue, as Jim Cramer defends its $80 billion debt raise.
"The critics say these are circular deals where Nvidia gives someone money and then they spend that money on NVIDIA product. I call them lazy Susan deals," Cramer said on Mad Money, days after selling Broadcom over an $80 billion debt raise tied to chip financing.
The divergent treatment rests on NVIDIA's balance sheet. The chipmaker carries debt-to-equity of 0.07, net debt-to-EBITDA of 0.006 and interest coverage of 503x, with free cash flow of $49 billion in the April quarter funding a $20 billion return to shareholders and an $80 billion share repurchase authorization layered on top of $39 billion remaining on the current plan. Broadcom, by contrast, needs the bond market to write its checks, Cramer argued.
NVIDIA closed at $213.05 on Aug. 25, up 19.20 percent year to date, with a market value near $5.16 trillion — large enough for its after-hours reaction to swing the S&P 500. Wall Street consensus calls for roughly $92 billion in revenue and $2.09 in adjusted earnings per share, with data center sales near $85 billion. Last quarter, revenue rose 85 percent year over year to $82 billion, with data center up 92 percent to $75 billion, and management guided to $91 billion plus or minus 2 percent with non-GAAP gross margin of 75 percent.
Guidance Sets the Tone for the AI Trade
The report doubles as a referendum on AI spending, since a handful of chip and AI names now drive most index earnings growth. All 29 analysts tracked by TipRanks rate NVIDIA a Strong Buy, with an average 12-month price target of $304.67, roughly 43 percent above Tuesday's close. Cramer also defended NVIDIA's $30 billion investment in OpenAI, which he had questioned a day earlier over whether it financed a competing chip.
The stock enters the report off a seven-session losing streak, with Cramer flagging a "monumental day" on X hours before the print. The numbers that follow will decide whether his double standard holds. Data center demand, supply commentary and third-quarter guidance will reveal whether the recent slide was a warning or an entry point. Investors will watch the earnings call after the close for updated segment margins and Rubin visibility.
This article is for informational purposes only and does not constitute investment advice.
