Cramer Intel stock view turns on AI spending doubts after tech sell-off
Jim Cramer said Intel remains his favored traditional tech holding after a sell-off driven by doubts over AI spending returns.
By Amanda Ross · Deals Correspondent
· 4 min read
Jim Cramer’s Intel stock view has become a test of whether investors will keep funding the artificial intelligence build-out after a sharp technology sell-off Friday. The CNBC commentator said the market is increasingly questioning returns on AI capital spending, a concern that hit chipmakers even after Intel’s latest results initially drew a positive after-hours reaction.
Cramer, writing for the CNBC Investing Club, described Friday’s technology decline as potentially the most significant sell-off in the sector in more than a year. He said the issue was less whether large technology companies can keep spending and more whether investors can see a clear path to profits from that spending.
The portfolio used for Cramer’s Charitable Trust has been reducing exposure to what he called traditional technology, including semiconductors, software and data-center names, while shifting toward technology-linked areas such as pharmaceuticals and aerospace, according to CNBC. Even so, Cramer said Intel remains the traditional technology name he prefers to back.
Why did Intel stock fall Friday?
Intel shares rose more than 10% in Thursday’s after-hours session following what Cramer called a strong report, according to CNBC, but the stock closed nearly 8% lower on Friday. Cramer attributed the reversal to a broader market reassessment of AI-related capital expenditure rather than to Intel alone.
He also pointed to weakness in Advanced Micro Devices shares and pressure across the AI hardware group. Cramer said disappointing Wall Street price-target changes may have contributed to Intel’s decline, but he framed the move as part of a wider retreat from companies exposed to large-scale AI infrastructure spending.
Capital expenditure, or capex, is money a company spends on long-term assets such as data centers, chips and networking equipment. In the AI cycle, large cloud companies have been buying hardware in bulk, which can lift suppliers’ revenue while raising investor concern about when those cloud companies will earn an adequate return.
Cramer cited Alphabet as a central case in that debate. He said the company’s stock came under pressure after Alphabet increased its capex plans, even though Google Cloud had what he described as a very strong quarter. Alphabet finance chief Anat Ashkenazi said the spending was needed to meet demand and referred to the company’s balance sheet, according to Cramer’s account.
Cramer said investors appear to want clearer evidence that AI spending will translate into earnings, not only higher demand. He also referred to market speculation that a large cloud provider could pause or reduce spending, while making clear he did not know whether such a move had occurred.
Why does Cramer favor Intel over other old tech names?
Cramer’s case for Intel rests on a shift he said Intel Chief Executive Lip-Bu Tan described in the mix of data-center chips. Tan told Cramer that the ratio had moved from roughly four graphics processing units for every central processing unit when he took over to about one CPU for every GPU, and that data centers could eventually use four CPUs for every GPU.
GPUs, led by Nvidia in the AI market, are specialized chips widely used to train and run AI models. CPUs, Intel’s traditional strength, handle general computing tasks and remain central to servers, personal computers and many industrial devices.
Cramer said GPU margins are richer than CPU margins, but argued that a better-managed Intel could benefit if demand shifts toward more CPUs. He also highlighted Tan’s background in semiconductor investing, foundries and chip packaging. Packaging refers to assembling chips so they can work together efficiently, an increasingly important process as shrinking chip features becomes harder.
Cramer said Nvidia remains a holding of the Charitable Trust and that he expects the company to report a strong quarter. CNBC disclosed that the trust is long Intel, Nvidia, Apple, Amazon, Meta Platforms and Microsoft.
The next test for the AI-spending debate comes as Amazon, Meta and Microsoft report earnings this week, with Apple also due to report, according to CNBC. Cramer said a stronger outlook from one large cloud company could change market sentiment, while continued doubt over spending discipline could keep pressure on AI-linked technology shares.
This story draws on original reporting from CNBC.
