CNBC’s Jim Cramer predicted Thursday that the selloff in artificial intelligence stocks is likely to continue, but urged investors not to panic.
micron GE Vernova It fell 22% on Thursday. All three stocks tumbled in Wednesday trading as well.
“I’d like to say today’s flash was the bottom,” said the “Mad Money” host, who doesn’t believe this is a redux of the Internet bubble, but warns that further declines are possible. Kramer argued that today’s AI companies are fundamentally different from the speculative businesses that collapsed during the dot-com bust.
“But if you look at the charts, it looks like many tech stocks, especially semi-annual stocks, are still out of favor because they’re still in the middle of the rally and have gone up a lot. Despite what you might think, it’s actually an orderly decline, because unlike in 2000, these are mostly profitable companies whose stock prices have gone up too much.”
Cramer said investors had pushed AI stocks too high by assuming the rapid pace of data center construction would continue indefinitely. Small developers such as coreweave, and Nevius They face special risks because they borrowed money to finance projects that may face regulatory delays.
“That’s what I’m most concerned about,” he said. “That’s the real problem. That could really hurt the stock market. … So far, no one of significance has defaulted. The only problem with the debt is that it’s related to the neo-cloud companies I mentioned. That’s not enough to sink us.”
Cramer suggested that a quick selloff could help the market more effectively untangle the excesses of the AI boom than a prolonged economic downturn.
“For me, I’d be happy to see them rip the Band-Aid off this market instead of delaying trying to rip the Band-Aid off a little bit every day,” he said.
For investors, Mr. Kramer recommended maintaining sufficient cash. Although semiconductor stocks could face further declines, he cited lower interest rates, signs of easing inflation and a possible end to the Iran war as reasons for optimism.
“If you have cash, you don’t panic,” Kramer concluded. “You’re never complacent either. Be clear-headed and then you can cut your losses until things turn around. They always do.”
