CNBC’s Jim Cramer said Monday that the data center industry is not dead, but the next wave of winners could be very different.
“The data center proposition, perhaps the biggest investment theme of this generation, is currently under attack and may never be the same,” the “Mad Money” host said.
Data center stocks have been under pressure as politicians and local communities oppose projects, citing electricity costs, water usage and other concerns. Cramer pointed to Pennsylvania and Texas, where governors who previously supported data center development have recently pushed for stricter requirements.
“We know we can create rules and appease the community, but unrestricted expansion is probably going to end,” Kramer said.
With the pace of development uncertain, Kramer said investors may be reluctant to pay premium valuations for data center beneficiaries such as gas turbine manufacturers. GE Vernova and memory company micron, sandisk, western digital and seagateEven if underlying demand remains strong.
But a change in circumstances could bring benefits Amazon, alphabet, microsoft and Metahe pointed out. Kramer said hyperscalers have the financial wherewithal to meet more stringent regulatory and community requirements that would be difficult for smaller, speculative data center developers.
“They’re the biggest beneficiaries because they can afford to compensate local communities and build warehouses full of servers,” Kramer said.
Fewer speculative developers means less competition for land, labor, and electricity, potentially reducing costs for hyperscalers as they continue to build out AI infrastructure.
For Kramer, the political backlash doesn’t mean abandoning the data center deal. Instead, the advantage could shift to the largest technology companies, which are able to continue construction despite tougher restrictions.
“They’re winners,” Kramer said. “I think they will continue to win because they were the losers when people estimate the cost of building these data centers. This political backlash is a godsend for the hyperscalers.”
Cramer’s Charitable Trust, a portfolio managed by CNBC’s Investment Club, owns shares in AMZN, GEV, GOOGL, META, MSFT, and MU.
