Cramer Defends NVIDIA Against Leverage Concerns
NVIDIA's (NASDAQ:NVDA) recent earnings report is expected to be closely watched after a high-profile endorsement from Jim Cramer. In an unusual move, Cramer defended NVIDIA against criticism of its vendor financing practice, which some say raises concerns about leverage.
The same practice was criticized when Broadcom (NASDAQ:AVGO), another AI chipmaker, announced plans to raise $80 billion in debt to support a planned chip financing deal. However, Cramer dismissed this as a 'lazy Susan deal' and remained bullish on NVIDIA's prospects.
According to the company's financials, NVIDIA has a fortress balance sheet with a debt-to-equity ratio of 0.07, net debt-to-EBITDA of 0.006, and interest coverage of 503x. In contrast, Broadcom needs the bond market to write checks for its financing.
NVIDIA's revenue has been growing rapidly, reaching $82 billion in the last quarter with a 92% increase in data center sales. The company is expected to report its latest earnings after the close on August 26, which could determine whether Cramer's endorsement holds up or not.