CNBC’s Jim Cramer said he wasn’t fazed by Tuesday’s drop in AI stocks because it’s exactly what the market needs.
“Rain is rain to gardening, just like falling stocks in the stock market,” said the “Mad Money” host. “You should expect them, and maybe even expect them. We just didn’t realize it at the time.”
Shares fell on Tuesday after a Wall Street Journal report that OpenAI missed its internal growth targets raised questions about spending among artificial intelligence stocks. After weeks of parabolic rally, Kramer said a reset was inevitable.
He pointed to the late 1990s, when stock prices rose relentlessly with few significant declines before a wave of corporate and insider selling crushed the market.
Kramer said he believes current AI leaders are serious companies with rosy prospects, but even strong companies can get overheated. That’s why he welcomed the negative press.
“I really liked this article… because it gave me the rain I was looking for,” he said.
This report helped fuel the decline in AI stocks, including: arm, advanced micro device, Dell Technologiesand corningwhich has skyrocketed in recent weeks.
Still, Kramer believes the long-term history of AI is intact. He said it’s days like Tuesday that encourage investors to cut stocks that are moving in a parabolic manner. Locking in profits at high prices makes it easier to enter and “take advantage of the rain” whenever it rains, he said.
“Professionals…every time they make a parabolic movement, they (take) a little bit out of the stock,” he said. “Then, when the stock price is down 5-7% from where we originally sold it, we start buying it back.”
