CNBC’s Jim Cramer said Monday that the AI boom is rewriting the rules for memory stocks, and their massive stock rally may not be over yet.
“I admit I’m not fast, but I don’t think I’m late,” the “Mad Money” host said.
Memory stocks have been the biggest beneficiary of AI trading this year. Kramer pointed out that sandisk Soaring 653% this year, seagate Increased by 261%. micron 254% increase; western digital It increased by 211%.
Such gains would normally make Mr. Cramer wary, especially given the history of the industry. Memory makers repeatedly responded to strong demand by aggressively ramping up production, eventually creating a glut and causing prices, profits and inventories to collapse. But Kramer thinks this cycle is different.
“Memory is in such short supply that Elon Musk spoke to Mr. X about how memory has become a critical bottleneck for data center growth,” Cramer said.
Just as important, memory makers are becoming more disciplined, Kramer said. Instead of aggressively adding capacity, companies are increasingly securing long-term customer contracts that secure attractive margins over many years.
“They’re basically just building it for themselves,” he says.
Kramer pointed to share buybacks as further evidence that the industry has learned from past cycles. SanDisk has $15.5 billion in stock buyback authorization remaining, while Seagate is working on a $5 billion stock buyback program announced last year. Western Digital approved an additional $4 billion in stock buybacks earlier this year.
“Instead of investing in new capacity, they take that money and send it to you, the shareholder,” Kramer said.
Cramer’s Charitable Trust, a portfolio managed by CNBC’s investment club, recently initiated a position in Micron in recognition of its growth potential. Cramer admitted it was uncomfortable to buy after such a dramatic rally, but said strong demand for AI and long-term contracts with customers could support further gains.
“If there’s no data center slowdown, I think Micron could double again before the boom ends,” Kramer said.
He acknowledged that data center expansion may eventually slow, and memory manufacturers may add excess capacity again. But, Cramer said, “I don’t see an overbuild happening anytime soon, so why not own one of these memory stocks?”
For Kramer, the bigger mistake is assuming that just because these companies have done so in the past, they are destined to repeat historical cyclical patterns.
“Sometimes the opportunity is just too great not to take advantage of it,” Kramer said.
