CNBC’s Jim Cramer has a blunt message for anyone trading artificial intelligence stocks with borrowed money: get out now. The Mad Money host warned Monday that the once-booming AI trade has grown increasingly fragile as investors begin questioning whether the breakneck pace of data center spending can actually continue. His advice was unusually direct. If you borrowed money to buy anything related to the data center, he said, sell it at the opening bell Tuesday morning no matter what price you get.
Cramer’s concern centers on margin trading, which involves borrowing from a brokerage to increase the size of an investment position. While that strategy can supercharge returns when share prices are climbing, it cuts just as hard in the other direction. A sharp drop can trigger a margin call, forcing investors to either cough up more cash or unload their holdings at exactly the worst moment. With margin debt levels having climbed sharply over the past year, Cramer said the risk has simply become too great. He told viewers plainly that if they are on margin, they need to get off it, because he no longer feels confident they will get out alive.
Rather than loading up on pure data center plays, Cramer suggested investors look for companies with broader foundations of growth. He pointed to building materials supplier CRH as an example, noting that while the company does supply materials for data center construction, most of its revenue comes from roads, bridges and office complexes. That kind of diversification offers a buffer when one sector hits turbulence. He also encouraged people to think differently about where tech exposure comes from, saying he still wants tech but not necessarily the familiar names investors have leaned on in recent years.
For those who own quality technology stocks outright and have not resorted to borrowing, Cramer struck a more reassuring tone. As long as you can stomach some volatility and hold through the rough patches, there is no reason to panic. The danger is not owning good companies through a choppy stretch but owing money on them while prices swing wildly beneath your feet.