Jim Cramer margin warning targets AI data center stocks bought with debt

A Jim Cramer margin warning on CNBC focused on investors who have borrowed money to buy shares tied to artificial intelligence infrastructure and data centers. Cramer said Monday that the AI trade has grown more fragile after a sharp run-up in many data center stocks and a recent pullback as investors question whether spending can keep expanding at the same pace.

“If you’re borrowing money to buy something related to the data center, then tomorrow morning, 9:30 a.m., sell it no matter what,” the “Mad Money” host said, according to CNBC. “You won’t regret it.”

The warning came as CNBC reported that margin debt has risen sharply over the past year. Cramer linked that build-up in borrowing to the higher risk of forced selling in a more volatile corner of the equity market.

What did Jim Cramer say about margin trading?

Cramer told viewers that investors holding AI-related data center stocks with borrowed funds should close those leveraged positions. “If you’re on margin, get off it,” he said. “I no longer feel that you’ll get out alive.”

Margin trading means borrowing from a brokerage to buy more securities than an investor could purchase with cash alone. The approach can increase returns when shares rise, but it also increases losses when prices fall and can lead to a margin call, requiring the investor to add cash or sell positions, potentially during a decline.

Cramer’s comments centered on AI infrastructure and data center companies, a group that has benefited from investor enthusiasm around computing demand and capital spending by technology firms. CNBC said the stocks have started to weaken as market participants reassess whether the pace of data center investment is sustainable.

Cramer argued that investors should avoid making concentrated leveraged bets on the theme. He said investors seeking exposure to the build-out should consider companies with broader sources of revenue rather than businesses dependent on one part of the AI cycle.

As an example, he pointed to CRH, the building materials supplier. Cramer said the company provides materials used in data center construction, while most of its business is tied to roads, bridges and office complexes.

“We want tech, but not the kind of big tech investors used to buy,” Cramer said. “We want materials tech and we want science tech.”

He drew a distinction between owning technology shares outright and using borrowed money to finance those holdings. Investors who hold what he described as strong technology stocks without margin may be able to endure market swings, he said, provided they can tolerate losses along the way.

“Now, if you own terrific tech stocks, and you’re not on margin, you could be fine, assuming you can handle some pain,” Cramer said.

This story draws on original reporting from CNBC.