Cramer: AI sell-off has further to go, but no dot-com repeat

CNBC's Jim Cramer said Thursday that the steep sell-off in artificial intelligence stocks likely has further to run, but he told investors not to panic and rejected comparisons to the dot-com crash. The decline has been driven by growing opposition to new data centers after the midterm elections, which has raised doubts about future AI infrastructure spending.

Shares of companies tied to the buildout fell sharply. Micron tumbled 17%, GE Vernova dropped 7% and Sandisk plunged 22% on Thursday. All three were also hit hard in Wednesday's session.

Orderly decline, not 2000

Cramer, host of CNBC's "Mad Money", said he wished he could say that day's flush marked the bottom. He cautioned that more downside may be ahead, but argued that today's AI companies are fundamentally different from the speculative businesses that collapsed during the dot-com bust. He said the decline is orderly because, unlike 2000, these are mostly lucrative companies whose stocks simply went too high. He added that charts show little support for many tech stocks, especially semiconductors, because they had run up so much.

Smaller developers in focus

Investors had pushed AI stocks too high by assuming the rapid pace of data center construction would continue indefinitely, Cramer said. He said smaller developers such as CoreWeave, Iren and Nebius face particular risks because they borrowed money to finance projects that could now confront regulatory delays. He called that his chief worry and said it could really hurt the stock market. However, he noted that no one of significance is defaulting on debt right now, and that the debt issue is tied to those "neocloud" companies, which he said is not enough to sink the market.

Cash and reasons for optimism

Cramer said he was glad the market was ripping the Band-Aid off rather than drawing out the downturn. He recommended investors keep sufficient cash. While semiconductor stocks could fall further, he pointed to falling interest rates, signs of easing inflation and the possibility of an end to the Iran war as reasons for optimism. He concluded that having cash helps investors avoid panic and complacency, and stay clear-headed until things get better, which he said they always do.

Source: CNBC.