Cramer Says AI Stock Rout Has Further to Run as Data Centre Doubts Mount

The two-day rout in artificial-intelligence stocks may have further to go, CNBC's "Mad Money" host Jim Cramer said on Thursday, after Micron fell 17 per cent, Sandisk 22 per cent and GE Vernova 7 per cent in a session that followed steep losses the previous day. The iShares Semiconductor ETF fell 3 per cent on Wednesday and a further 10 per cent on Thursday. The selling bears directly on the chips-and-compute layer of the AI trade: Cramer said investors had pushed AI stocks too high by assuming the rapid pace of data-centre construction would continue indefinitely, with growing opposition to new data centres following the midterm elections raising doubts about future infrastructure spending.

Cramer declined to call a floor. "I wish I could say that today's flush was the bottom," he said, while cautioning that he did not regard the episode as an internet bubble redux. He argued that the decline was orderly rather than a repeat of 2000: "... unlike 2000, these are mostly lucrative companies with stocks that went too high." He added that there still appeared to be "no support for so many Tech stocks, especially the semis, because they ran so much on the way up."

The difficulty, as Cramer framed it, is valuation rather than solvency. "We don't know what to pay for any of the stocks connected to the data center and that's why this moment is so fraught," he said. He cited Nvidia trading at roughly 12 times next year's earnings with an expected growth rate of 70 per cent — "an incredible bargain" — but added: "But it is not a bargain if, the following year, it can't grow any further, because the U.S. won't permit new data centers as fast as they do now." Advanced Micro Devices reported "one of the best quarters I have ever seen," he said, and chief executive Lisa Su has projected the broader data-centre market could eventually reach $1 trillion; shares stood at $188 in March and $404 by his account, which he called "awfully high to me." Micron's long-term take-or-pay contracts offer revenue visibility, though Cramer said he was unsure how sturdy they would prove if signatories ran into difficulty.

On credit risk, Cramer said "no one of significance is defaulting on their debt," and that the concern attaches to the "neocloud" companies he named — CoreWeave, Iren and Nebius — which borrowed to finance projects that could now face regulatory delays. "That's what I am chiefly worried about," he said. "That's the real problem. That's what could really hurt the stock market ... That's not enough to sink us." The open question he posed is whether regulatory hurdles significantly slow data-centre construction or merely delay it; until the outlook clarifies, he suggested, even exceptional earnings may not justify current valuations. He recommended investors hold sufficient cash — "If you have cash you won't panic" — and pointed to falling interest rates, signs of easing inflation and the possibility of an end to the Iran war as grounds for optimism. Cramer's Charitable Trust, the portfolio run by the CNBC Investing Club, owns shares of Nvidia and Micron.