Cramer downgrades Nvidia after CEO scandal

The CNBC Investing Club lowered its rating on Nvidia from a buy recommendation to a hold on Tuesday. Portfolio director Jeff Marks explained that the firm is unwilling to call the stock a buy after it fell nearly 10% over two trading sessions. The team is pausing until it becomes clearer what happens after the company's board investigates a relationship between CEO Jensen Huang and an accused Chinese spy.

Marks noted that placing Huang on leave during an investigation is standard practice. He described the process as orderly and said it allows space to get to the bottom of the situation. However, he argued that Nvidia is not proceeding in an orderly fashion, which explains why the stock is dropping so sharply.

Market conditions on Tuesday also played a role in the broader outlook. Stocks finished lower after consumer price index data came in hotter than expected. This pushed bond yields up, following two days of strong gains after a post-election rout last Thursday. Cramer pointed out that oil prices dropped below $90 per barrel for the first time since August. He suggested this de-escalation in the Iran war could make the October inflation report the last bad one. Since much of the recent inflation increase is driven by energy prices, lower oil costs might limit the Federal Reserve to a quarter-point interest rate increase next month instead of a half-point hike.

Investors are also shifting their focus away from the data center sector. Cramer has said he wants to reduce exposure to data center stocks and increase holdings in non-tech names. This strategy follows concerns about a potential slowdown in data center construction after key Democratic wins in the midterms. The club is looking to bulk up its position in Constellation Brands, the maker of Modelo and Corona beer. Lower oil prices should leave consumers with more disposable income, which benefits the beer maker.

Cramer stated he is not ready to add more Constellation shares yet. He wants to see the stock decline first so the fund can improve its average cost basis before any meaningful rally occurs. The club's charitable trust is currently long in both Nvidia and Constellation Brands.

The club covered Take-Two Interactive, Hims & Hers, and On Holding in a rapid-fire segment at the end of the Tuesday livestream. The Morning Meeting airs every weekday at 10:20 a.m. ET. Subscribers receive a trade alert before Cramer executes a trade in his charitable trust's portfolio. He waits 45 minutes after sending the alert before buying or selling. If he has discussed the stock on CNBC television, he waits 72 hours after the alert before executing the trade.