CNBC’s Jim Cramer warned Tuesday that investors may be getting ahead of themselves by vowing to get artificial intelligence trading back on track.
AI stocks rose for a second day in a row, boosted by renewed enthusiasm for chipmakers following their acquisition by a banking group. black stone announced $63 billion in funding for human buy Broadcom’s computing hardware. The rally followed Monday’s rally, driven in part by Anthropic’s S-1 filing. But Kramer warned that renewed optimism won’t solve the pressures facing the data center industry, which was hit hard late last week.
“I’m glad that people are so relieved that the technology is okay because they’re going to get their money back,” the “Mad Money” host said. “I don’t think that’s a reason to reveal everything. I think it’s a reason to look at other sectors of the economy.”
Kramer’s skepticism focuses on three risks that remain.
First, Kramer remains concerned that a small AI infrastructure company known as Neocloud is taking on too much debt to fund the construction of its data centers. Rising interest rates have heightened concerns about whether these borrowing costs can be maintained. Mr. Kramer raised a blank arrow. coreweavethe yield on its bonds has reached 15%, Nevius and Airen. Despite Coreweave’s stock rebounding nearly 8% on Tuesday, he warned that new negative news for Coreweave could emerge.
“We’ve learned that for every positive story about something in the data center, there’s a ton of negative stories about something going wrong, including coreweave,” Kramer said.
Second, Mr. Kramer questioned whether Broadcom and Anthropic’s financing agreement was as secure as investors believed. While the $63 billion package shows lenders are still willing to fund large AI investments, Cramer raised concerns that Anthropic was borrowing money to buy Broadcom’s technology rather than paying for it with profits from its own operations. “People don’t seem to understand that (Anthropic) was funded by a financing arrangement that Broadcom arranged to buy equipment from Broadcom,” he said.
Finally, Cramer said Tuesday’s calm in the bond market may be short-lived. Crude oil prices have fallen; 10 year treasury Yields have fallen below 5%, easing some of the pressure on AI companies that need to borrow heavily to fund data center investments. But that situation could reverse, especially as the Federal Reserve is expected to announce its latest interest rate decisions on Wednesday afternoon, followed by Chairman Kevin Warsh’s post-meeting press conference. Next week’s midterm elections and a potential flare-up in the Middle East could be further variables.
“As an exception, Nvidiathese data center companies don’t have that much capital. So they have to borrow money,” Kramer said. “Interest rates are so high that returns are becoming uncertain. That hasn’t changed at all.”
Kramer emphasized that he remains an “unabashed believer in the advancement of AI.” But it won’t declare its shores off-limits until the industry’s funding challenges ease.
