Here are real AI stocks to invest in and speculative ones to avoid

Concerns about stock valuations of companies tied to artificial intelligence have rattled the market this week. Whether these concerns subside, as they did on Friday, or flare up again will certainly be something to watch in the coming days and weeks. We understand concerns about valuations in speculative aspects of the AI business such as nuclear stocks and neoclouds. Jim Cramer warned about them many times. But last week, the broader set of AI took a hit, including the actual companies making money and driving what many are calling the fourth industrial revolution. We have many of them: Nvidia and Broadcom on the chip side, GE Vernova and Eaton in the derivatives business of powering energy-guzzling AI data centers. This is not what it should be based on their foundations. Apart from valuations, concerns also focus on capital expenditures and attrition from large investments in AI infrastructure. At this point, investors face a choice. You might prefer the bears who stick to their spreadsheets and estimate the usable life of their technology assets based on history, a seemingly straightforward approach, and apply those depreciation rates to their financial models and argue that the chips will be nearly worthless after three years. Or you can follow commentary from the management teams running the biggest companies driving the AI business, as well as Jim's insights from conversations with the smartest CEOs in the world. When it comes to real players driving this AI investment cycle, like the ones we invest in, we don't think the valuations are that high or unreasonable when we consider their growth rates and their importance to the US and therefore the global economy. We're talking about Nvidia CEO Jensen Huang, who says advances in his company's CUDA software have increased the lifespan of GPU chip platforms to about five to six years. Remember, CoreWeave recently re-signed with Nvidia for the H100s launching in late 2022. Bears with spreadsheets in hand will tell you these chips are worthless. But we do know that the H100s retain most of their value. Or hear Lisa Su, CEO of Advanced Micro Devices, say last week that her customers are now at a point where they can "see a return on the other side" of these massive investments. For our part, we understand the expense concerns and depreciation issues that would arise if these companies overestimated the useful lives of these assets. But those who bet against the likes of Jensen Huang and Lisa Su, Meta Platforms CEO Mark Zuckerberg, Microsoft CEO Satya Nadella, and others who have been driving innovation in the tech world for more than a decade have been burned again and again. While the bears' concerns are not invalid, long-term investors are better off taking their cues from tech experts. Artificial intelligence is real, and as adoption increases and technology becomes embedded in our daily lives, just like the internet, it will lead to greater and greater productivity gains. We believe in the management teams of the AI stocks in which we invest, and while this belief is not an investment strategy, it is based on a historical track record of strong execution, the knowledge that these companies' offerings are best-in-class, and an examination of their underlying business fundamentals and financial profiles. Standing with these technologist management teams against the noisy financial expert has kept us on the right side of trading for years, and we don't see that changing in the future. (See here for a complete list of stocks in Jim Cramer's Charitable Trust, including NVDA, AVGO, GEV, ETN, META, MSFT.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.