Cramer advises selective investing amid AI boom

Jim Cramer from CNBC advised that investors should be more discriminating amidst the surge in semiconductor stocks.

Cerebras, a company that designs chips for AI tasks, carried out the biggest IPO of the year on Thursday. 

Initially priced at $185 on Wednesday, the stock rose to about $350 shortly after, momentarily valuing the company at nearly $107 billion. It closed the day at $311 per share, equating to roughly a $95 billion market value.

"That's a term for an unrealistic situation," remarked the "Mad Money" host, discussing Cerebras' remarkable market debut. "The activity today mirrors that of 1999."

To Cramer, this move signified a wider inclination towards anything associated with AI — a trend he remains highly in favour of, though he now feels it calls for more investor prudence.

"I've backed this semiconductor surge throughout," he stated. "Nvidia CEO Jensen Huang's vision of the fourth industrial revolution is something I've fully supported."

He referred to Cisco as a stock he confidently holds after the firm exhibited what he called a "remarkable result," marked by rising sales and profits linked to spending on AI infrastructure. Cisco produces networking chips used for data transmission within data centres.

"Cisco's recent upward move was earned," Cramer noted. "Today's 13% increase was fully warranted and perhaps more."

Cramer also praised Nvidia, suggesting the stock remains a good deal despite its substantial rise.

"There's a strong likelihood that Nvidia's stock, when considering forward earnings projections, is now less expensive than an average stock in the S&P 500," he mentioned. "That's unbelievable."

He further touched on memory and storage companies like Micron, Sandisk, and Western Digital as being good holdings, provided supply chain issues continue and AI computing demand stays high.

"I'm fine with stocks that soar due to scarce supply," he remarked.

The takeaway? Cramer suggested investors should stay interested in chip stocks but become far choosier about which ones to buy as the excitement around AI gains momentum.

"I urge you to practice discipline," he advised. "Comprehend the functions of these companies and why they might not be worth their price tags."