Jim Cramer, host of CNBC's "Mad Money," cautioned on Tuesday that investors may be moving too quickly in concluding that the artificial intelligence trade has recovered. He argued that the latest rally leaves several pressures on the data center sector unresolved.
AI-related stocks rose for a second consecutive session, helped by fresh enthusiasm for chipmakers. A group of banks and Blackstone announced $63 billion in financing for Anthropic to buy Broadcom's computing hardware. The advance followed Monday's gains, which were partly prompted by Anthropic's S-1 filing. The data center trade had been hit hard late last week.
"I'm pleased that people feel so comfortable that tech is all good to go because there is money flowing back in," Cramer said. "I don't think that's a reason to call all clear. I think it's a reason to look at other sectors in the economy."
His first concern is the group of smaller AI infrastructure firms known as neoclouds, which are borrowing heavily to pay for data center construction. Rising interest rates have sharpened doubts about whether they can sustain those costs. Cramer named CoreWeave, whose bonds have yielded as much as 15%, as well as Nebius and Iren. CoreWeave shares rebounded nearly 8% on Tuesday, but he warned that more negative news about the company could surface. "I have learned that after every positive story about anything in the data center, there will be a plethora of negative stories about something wrong, including Coreweave," he said.
Second, Cramer questioned whether the Broadcom-Anthropic package was as comforting as many investors assumed. He acknowledged that it showed lenders remain willing to fund huge AI investments. But he pointed out that Anthropic is borrowing to purchase Broadcom's technology rather than using profits from its own business. "People don't seem to grasp that [Anthropic] got the money in the Broadcom-arranged financing deal to purchase equipment from Broadcom," he said.
Third, he suggested that the calmer bond market seen on Tuesday might not last. Oil prices fell and the 10-year Treasury yield slipped below 5%, easing some strain on companies that must borrow to fund data centers. Those conditions could reverse, though, especially with the Federal Reserve due to announce its interest rate decision Wednesday afternoon, followed by a press conference from Chairman Kevin Warsh. Next week's midterm elections and possible flare-ups in the Middle East could add further volatility.
"With the exception of Nvidia, these data center companies don't have a lot of money. So they have to borrow the money," Cramer said. "The rates are getting so high that the return is getting uncertain. That hasn't changed at all."
Cramer stressed that he remains "an unabashed believer in the AI build-out." Still, until the industry's financing challenges ease, he said he is not ready to declare the coast clear.
