What happened
Jim Cramer says a two-day AI rally and a $63 billion Anthropic financing package do not clear the data center trade's borrowing risks.
In this article
CNBC's Jim Cramer warned Tuesday that investors may be getting ahead of themselves by declaring the artificial intelligence trade back on track.
AI-related stocks rallied for a second straight session, fueled by renewed enthusiasm for chipmakers after a group of banks and Blackstone announced $63 billion in financing for Anthropic to purchase Broadcom's computing hardware. The gains followed Monday's rally, sparked in part by Anthropic's S-1 filing. But Cramer cautioned the renewed optimism doesn't resolve the pressures facing the data center trade, which was 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," the "Mad Money" host 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."
Cramer's skepticism centers on three lingering risks.
First, Cramer remains concerned about smaller AI infrastructure companies, known as neoclouds, that are taking on significant debt to fund the data center build-out. Rising interest rates have intensified worries about their ability to sustain those borrowing costs. Cramer singled out CoreWeave, whose bonds have yielded as much as 15%, along with Nebius and Iren. Despite an almost 8% rebound in CoreWeave shares Tuesday, he warned that fresh negativity around CoreWeave could emerge.
"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," Cramer said.
Second, Cramer questioned whether the Broadcom-Anthropic financing deal was as reassuring as investors believed. While the $63 billion package demonstrated that lenders were still willing to finance massive AI investments, Cramer raised concerns that Anthropic is borrowing money to buy Broadcom's technology, rather than paying for it with 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.
Finally, Cramer said that Tuesday's calmer bond market could prove short-lived. Oil prices declined and the 10-year Treasury yield fell below 5%, easing some pressure on AI companies that need to borrow heavily to fund their data center investments. But those conditions could reverse, particularly with the Federal Reserve set to announce its latest interest rate decision Wednesday afternoon, followed by Chairman Kevin Warsh's post-meeting press conference. The midterm elections next week and potential flare-ups in the Middle East may represent additional sources of 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 emphasized that he remains "an unabashed believer in the AI build-out." But until the industry's financing challenges ease, he isn't ready to declare the coast clear.
Click here to read Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest smarter
Sign up now for the CNBC Investing Club to follow Jim Cramer's every move in the market.
Questions for Cramer? Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up! Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram
Questions, comments, suggestions for the "Mad Money" website? [email protected]
Source coverage
CNBC's Jim Cramer warned Tuesday that investors may be getting ahead of themselves by declaring the artificial intelligence trade back on track.
AI-related stocks rallied for a second straight session, fueled by renewed enthusiasm for chipmakers after a group of banks and Blackstone announced $63 billion in financing for Anthropic to purchase Broadcom's computing hardware. The gains followed Monday's rally, sparked in part by Anthropic's S-1 filing. But...
Full source content
In this article
CNBC's Jim Cramer warned Tuesday that investors may be getting ahead of themselves by declaring the artificial intelligence trade back on track.
AI-related stocks rallied for a second straight session, fueled by renewed enthusiasm for chipmakers after a group of banks and Blackstone announced $63 billion in financing for Anthropic to purchase Broadcom's computing hardware. The gains followed Monday's rally, sparked in part by Anthropic's S-1 filing. But Cramer cautioned the renewed optimism doesn't resolve the pressures facing the data center trade, which was 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," the "Mad Money" host 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."
Cramer's skepticism centers on three lingering risks.
First, Cramer remains concerned about smaller AI infrastructure companies, known as neoclouds, that are taking on significant debt to fund the data center build-out. Rising interest rates have intensified worries about their ability to sustain those borrowing costs. Cramer singled out CoreWeave, whose bonds have yielded as much as 15%, along with Nebius and Iren. Despite an almost 8% rebound in CoreWeave shares Tuesday, he warned that fresh negativity around CoreWeave could emerge.
"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," Cramer said.
Second, Cramer questioned whether the Broadcom-Anthropic financing deal was as reassuring as investors believed. While the $63 billion package demonstrated that lenders were still willing to finance massive AI investments, Cramer raised concerns that Anthropic is borrowing money to buy Broadcom's technology, rather than paying for it with 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.
Finally, Cramer said that Tuesday's calmer bond market could prove short-lived. Oil prices declined and the 10-year Treasury yield fell below 5%, easing some pressure on AI companies that need to borrow heavily to fund their data center investments. But those conditions could reverse, particularly with the Federal Reserve set to announce its latest interest rate decision Wednesday afternoon, followed by Chairman Kevin Warsh's post-meeting press conference. The midterm elections next week and potential flare-ups in the Middle East may represent additional sources of 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 emphasized that he remains "an unabashed believer in the AI build-out." But until the industry's financing challenges ease, he isn't ready to declare the coast clear.
Click here to read Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest smarter
Sign up now for the CNBC Investing Club to follow Jim Cramer's every move in the market.
Questions for Cramer? Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up! Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram
Questions, comments, suggestions for the "Mad Money" website? [email protected]
How this page is built
Goose Pod turns cited reporting into a public episode summary first, then pairs that summary with audio playback so listeners can check the source material before they decide how deeply to engage.
The goal is to make this page useful as a news landing page first, while still giving listeners transcript access, related episodes, and direct links back to the original publishers.
