CNBC's Jim Cramer said Thursday that the steep sell-off in artificial intelligence stocks is likely not finished, even as he urged investors not to panic.
Shares of companies tied to the AI data center buildout fell sharply, with Micron tumbling 17%, GE Vernova dropping 7% and Sandisk plunging 22% on Thursday. All three stocks were also crushed in Wednesday's session. The declines came as growing opposition to new data centers following the midterm elections raised doubts about future AI infrastructure spending.
"I wish I could say that today's flush was the bottom," the "Mad Money" host said, cautioning that there may be more downside ahead. Still, he pushed back on the idea that this is an internet bubble redux, arguing that today's AI companies are fundamentally different from the speculative businesses that collapsed during the dot-com bust.
"But I look at the charts, and there still seems like there's no support for so many Tech stocks, especially the semis, because they ran so much on the way up," he said. "However it might feel, it's actually an orderly decline because unlike 2000, these are mostly lucrative companies with stocks that went too high."
Cramer said investors had pushed AI stocks too high by assuming the rapid pace of data center construction would continue indefinitely. He singled out smaller developers such as CoreWeave, Iren and Nebius as facing particular risks because they borrowed money to finance projects that could now face regulatory delays.
"That's what I am chiefly worried about," he said. "That's the real problem. That's what could really hurt the stock market." Even so, Cramer noted that "no one of significance is defaulting on their debt," adding that the debt concern is tied to the neocloud companies he mentioned and that "that's not enough to sink us."
Cramer suggested that a swift sell-off could help the market work off the excesses of the AI boom more effectively than a prolonged downturn. "I for one am glad they are ripping the Band-Aid off this market rather than slowing trying to take it off a little bit each day," he said.
For investors, Cramer recommended maintaining sufficient cash. While he warned that semiconductor stocks could face further declines, he pointed to falling interest rates, signs of easing inflation and the possibility of an end to the Iran war as reasons for optimism.
"If you have cash you won't panic," Cramer concluded. "You won't be complacent, either. You will be clear-headed and that's how you will lose less money until things get better. They always do."
