Cramer urges wider entry points as AI stock volatility intensifies

CNBC’s Jim Cramer said Monday that recent sharp moves in AI-related shares require investors who are adding exposure to use wider price intervals and staged purchases rather than taking a full position at once. In comments during CNBC Investing Club’s Morning Meeting, he said he was not ready to put new money into technology stocks, while describing how investors could approach declines in chipmakers and other data-centre companies.

Cramer called the approach using “wide scales”: setting purchase prices in advance and buying gradually as shares fall, with larger gaps between each trade than would be used in calmer markets. The purpose is to reduce the effect of abrupt price moves on the average purchase price, according to the CNBC Investing Club discussion.

The comments followed a Sunday column in which Cramer addressed caution toward technology shares, CNBC said. The club said recent trading in hyperscalers and AI stocks had changed enough to require wider buying intervals.

CNBC’s Investing Club said it still looks for opportunities to buy shares of companies it considers high quality when prices fall, provided the investment case and fundamentals have not changed. The club highlighted earnings estimates as a key factor in that assessment. It said a decline that previously might have supported adding to its Intel position, such as 5%, would now need to be closer to 10% given the recent volatility.

Cramer described the staged approach as a pyramid-style plan, under which purchases are made at lower prices and can become larger as the stock declines. The club used a hypothetical 80-share Intel position to outline several ways the structure could work.

• Under basic dollar-cost averaging, an investor would buy 20 shares in each of four trades at predetermined lower prices.
• Under a weighted pyramid, the investor would increase the size of each purchase as the price falls, such as 5 shares, then 15, then 25, then 35, for a total of 80 shares.
• Under a doubling-style plan, the investor would start with 10 shares, add another 10, then 20, then 40, also reaching 80 shares.

The club said each example is designed to put more of the final position at lower prices, though it also said the choice depends on an investor’s willingness to keep buying during a decline. Cramer said investors need to decide in advance which plan they can follow when markets are volatile.

The club also said a rally before all planned purchases are made would stop the staged buying process, leaving the investor with a smaller position. It added that volatility may justify increasing the distance between each purchase level, giving an example in which a first buy might follow a 5% decline, a second an 8% decline and a third a 10% decline.

CNBC Investing Club said subscribers receive trade alerts before Cramer makes trades for his charitable trust. It said Cramer waits 45 minutes after sending an alert before buying or selling a stock in the trust, and waits 72 hours after an alert if he has discussed the stock on CNBC TV. The club also said its information is subject to its terms, privacy policy and disclaimer, and that no fiduciary duty or guaranteed outcome is created.

This story draws on original reporting from CNBC.