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Wall Street’s love affair with the artificial intelligence trade — a major driver of the market’s gains in recent years — has encountered a rough patch this fall. And on Tuesday, CNBC’s Jim Cramer said more declines in AI stocks could be on the way.
In examining what has resulted in the red-hot AI trade turning cold, Cramer said the seeds of the market’s concerns were planted in September around Oracle’s earnings report, and they only mounted from there as enormous spending commitments on AI infrastructure — especially from ChatGPT maker OpenAI — snowballed.
“You know I’m still a believer in artificial intelligence,” he said. “I do think we should experience more turbulence before we reach the promised land, and even a big shakeout if OpenAI is truly worse than we think.”
With Oracle, investors in September had initially cheered its massive growth in cloud-computing backlog with a 36% stock gain in a single day. But media reports soon indicated that the vast majority of those future commitments are tied to a single customer in OpenAI. As Oracle turned to the debt markets to help pay for its construction of AI infrastructure and OpenAI announced a slew of other agreements with other tech players, Cramer said investors started to show signs of uneasiness.
