Jim Cramer: AI trading logic shifts, suppliers like Micron and Intel will benefit from massive spending cycle

ME AI news: Former hedge fund manager and CNBC host Jim Cramer said that Wall Street’s current pricing logic for AI trades has changed. The market is now rewarding technology companies that provide products for the AI boom, rather than customers who pay for AI investments. Cramer said that in June, the “Magnificent Seven” together saw about $2.3 trillion in market value evaporate. Investors have begun to question whether these companies’ massive AI spending will ultimately generate enough profit and free cash flow.

Amazon, Alphabet, Microsoft, and Meta are the largest spenders on AI data center investment. He believes these hyperscale cloud service providers are becoming the victims of their own AI ambitions. Cramer said that while these companies have the financial ability to continue pouring billions of dollars into the effort, market demand for computing infrastructure has already outpaced supply, driving up the costs of key components such as memory chips and networking equipment. This shift benefits the “shovel sellers” in the AI boom—not the party that is footing the expense.

He said: “The companies with the biggest gains are exactly the opposite of the Magnificent Seven. They produce products that are in short supply, with demand that is through the roof.”

Cramer pointed out that Micron Technology and Sandisk, memory chip makers, as well as Intel, Marvell Technology, and AMD, were some of the biggest winners in the second quarter. He said that the imbalance between supply and demand has driven these companies’ strong earnings growth and led analysts to continuously raise their ratings and target prices. Among them, Cramer named Intel his new most favored stock, saying that CEO Lip-Bu Tan is revitalizing the chipmaker. Intel is expected to benefit from rising demand for CPUs, advanced chip packaging, and semiconductor manufacturing based in the United States.

(Source: BlockBeats)