Cramer rejects a “new and negative artificial intelligence narrative” on Wall Street

VaselineSeptember 6, 2024

0 1 minute read

Cramer rejects a “new and negative artificial intelligence narrative” on Wall Street

CNBC’s Jim Cramer on Friday argued against a “new and negative AI narrative” that some on Wall Street have embraced that suggests large-scale spending on artificial intelligence has peaked.

“I think infrastructure AI remains the biggest story of our time,” he said. “The data center, the hardware and the software for it are much stronger than the bears think.”

The AI giant Nvidia and semiconductor outfit Broadcom have seen their shares fall after their most recent quarters beat estimates, but failed to pull them out of the water. Cramer said investors are reading this “relatively underperformance” to mean that hyperscalers have spent too much on new AI technology.

But Cramer said Nvidia’s gross margin has been hurt because the company currently doesn’t have enough supply to meet demand for its new Blackwell AI chip. He added that spending on new AI hardware can be uneven by customer and said the two companies are “unwitting victims” of widespread AI pessimism.

He used a Google versus Bing analogy, saying Microsoft did not spend enough on the search, giving Alphabet a long-lasting advance in business. Hyperscalers don’t want to be left behind in the same way, he said, suggesting, for example, Meta AI needs chips from Nvidia to complement programs like Gemini, Clause or ChatGPT. Cramer also noted that Broadcom should benefit from its recent acquisition of VMware and the launch of Applehis newest iPhone.

“Eventually, people will realize that there is no such thing as an AI bubble, it’s just intense demand and very little supply,” Cramer said. “The Magnificent Seven have had repeated periods of underperformance, but they always tend to bounce back, as they should. They are all incredibly well driven and have both accelerated computing and artificial intelligence.”