Semiconductor stocks have tumbled in recent days, but CNBC’s Jim Cramer said Tuesday there are compelling reasons not to give up on the group.
of VanEck Semiconductor ETF Higher oil prices and interest rates could prolong the decline, Cramer warned. But he argued that semiconductor stocks are increasingly trading together, regardless of their individual fundamentals, obscuring the strong demand that drove the sector’s impressive rally earlier this year.
To illustrate his point, Mr. Kramer described a recent visit. apple In the showroom, we saw devices with more personalized Siri and advanced smart home technology. The experience highlighted that increasingly sophisticated consumer products require more computing power and memory, creating further opportunities for chipmakers.
“Go to the showroom before you decide to run out of the semifinals because you can’t handle the pain,” the “Mad Money” host said. “Go look at where these chips are being used. They’re showing up in unexpected places. Don’t look at the semiconductor index, look at the devices.”
Kramer points to memory chip manufacturers micron This is an example of a company whose fundamentals have been overshadowed by widespread selling. The company is one of the biggest winners in artificial intelligence development, with demand for memory chips far outstripping supply. Kramer emphasized that the company’s 26 long-term customer contracts currently cover about 35% of its revenue through 2030, and negotiations for 2031 have already begun. These take-or-pay contracts require customers to keep financial commitments, which gives Micron greater visibility into future revenue, he said. “I would be concerned if there was no agreement with Micron,” Kramer said.
And the demand story is not limited to memory chips. Mr. Kramer also emphasized intel and AMD“We make CPUs, the basic building blocks of almost every machine under the sun.”
Kramer acknowledged that the group could face further losses after making huge profits, but said investors should not ignore the underlying demand behind those gains. “No matter how high these stocks go, it’s reasonable to expect a sharp pullback,” he said. “If you look at the devices and see the use cases that are exploding, I think you can understand why Micron, Intel, and AMD are so successful.”
“It wasn’t all about situational awareness. It was about wayward hedge funds that used borrowed money to push so many semis to unsustainable levels,” Cramer said. “A lot of it is just raw demand.”
Cramer’s Charitable Trust, a portfolio managed by CNBC’s Investment Club, owns stock in AAPL, INTC, and MU.
