Cramer calls rally in chip stocks ‘worrisome.’ How he’s positioning
CNBC’s Jim Cramer said the strong rise in semiconductor and AI-related stocks could send a warning signal about the broader market.
“We’ve been seeing parabolic movements in the market lately,” the “Mad Money” host said. “These are alarming.”
His warning came after a historic run Philadelphia Semiconductor IndexOften referred to as SOX, it rose for 18 consecutive sessions (the longest streak ever) before pulling back on Monday. During this streak, the index rose more than 47%.
Cramer believes such action is rare and potentially disturbing.
Despite Monday’s decline, the index increased by 37% in April. If the month ends at current levels, Cramer said it would be the second-best month in the index’s history, trailing February 2000, just before the dot-com bubble burst.
This comparison did not go unnoticed on Wall Street. Analysts at Goldman Sachs recently said the index is trading nearly 50% above its 200-day moving average, a key momentum indicator used by technical strategists. This is the widest level since 2000, according to Goldman. Morgan Stanley, meanwhile, flagged semiconductors as one of the most overbought in history, warning that the group could pull back in the near term.
The biggest concern for Cramer is how widespread the rally has become. A number of stocks tied to AI infrastructure and data centers have seen similarly sharp gains in a short period of time. Names like Advanced Micro Devices, Arista NetworksAnd Marvel Technology It’s up 50% or more since late March.
“Such moves worry me,” he said, warning that sharp gains could quickly reverse once expectations exceed fundamentals.
he pointed out POET Technologies for example. The stock fell on Monday after a key prospect canceled purchase orders; This underlined how quickly sentiment can change when expectations outpace fundamentals. Last week, Cramer advised investors to avoid pursuing POET shares after the dramatic rise, saying the business was too speculative.
Of course, Cramer isn’t calling on investors to abandon the market. Instead, he advocates a more measured approach.
“I don’t want to overreact,” he said. “But we’re doing some action on the fringes.”
That includes trimming positions of big winners in the Charitable Trust portfolio managed by CNBC Investment Club and avoiding the temptation to chase stocks that have already gone parabolic. He added that some of the names are as follows: Arm HoldersThey remain attractive over the long term and may be better buys on pullbacks.
“Cut some of the winners… don’t chase the parabolic stuff… and let’s wait to see if there will be a more benign pullback from this wild situation of the last few weeks,” he said.
Disclosure: Cramer’s Charitable Trust, the portfolio used by CNBC Investment Club, owns shares of Arm Holdings.
