The money to AI stocks is a problem, and how it can be fixed

We don't have enough money to enter this market. Funds are flowing only into stocks tied to data center construction and a few other stocks. Even the most superficial of data center "stories," like warehouse REITs and machinery stocks like Cummins and Dover, manage to keep themselves afloat if they have healthy data center orders — and not much else. As the aerospace industry crumbles due to the prospect of a long war in Iran, action at the industry's defense companies (RTX, GE Aerospace, Honeywell) has been dire. It's a sign that even if the present remains strong, there isn't enough money coming in to cushion the blow of an uncertain future. The most worrying part of this market is the demise of healthcare, especially the pharmaceutical industry. Just as anything peripherally related to the data center is a blessing, anything even tangentially related to medicine is a nightmare. When I listened to Thermo Fisher CEO Marc Casper on "Mad Money" last week, I was struck by how far the stock had fallen, despite his confidence and the medical instrument and equipment maker's strong quarterly numbers. They were met with brutality. Danaher is a similar story. This life sciences company has been a disaster for centuries, so the quarterly nightmare has now become the norm. It's as if the company expected bad results and was grateful for them. At least Thermo Fisher is coming out and defending itself. Danaher is hiding, given that management seems so resigned to mediocrity, but I'm not sure for what. The old Danaher would reshuffle the deck or use something non-health related to balance the strength of the sellers. Not anymore. But that might not matter right now. Consider the case of Abbott Labs. I know this seems unusual given that the stock is deeply mired below $90, but the medical device maker is a very good company. But the freefall is so pronounced that I can understand why people might want to avoid it, even at these low prices. What's to stop Abbott from falling to $80 if healthcare is avoided? The same goes for Cardinal Health. I agree this Club stock is a disaster, but I'm glad we didn't buy it for a ton of points, which will give us a good average basis when we see the quarter on Thursday. This kind of decline often heralds truly suboptimal results, but we're betting that this pharmaceutical and medical supplies distributor is actually beating quarterly forecasts. Cardinal doesn't have any problems that more money coming into the market wouldn't cure. The most daunting stock in my book is Johnson & Johnson. Here's a stock that hit $200 with some excellent numbers. Then he delivered a second batch of equally good numbers, and it meant nothing; The stock has fallen about 5% since then. The problem right now is that the chart is so ugly that it calls the entire dynamic breakout into question and a return to the next stop at $180. This would be a decline unthinkable in any other market. But in this one, where the fundamentals are indistinguishable and 19 times earnings equals 16 times earnings, it seems that way. Consider the surprising nature of an uncertain price-to-earnings ratio at one of the most diverse companies in the world at J&J, with its triple-A balance sheet, 18 potential blockbuster drugs, and the elimination of its nondescript low-multiple orthopedics division. However, this action gives the impression that, although unlikely, a major move that appears to be permanent could be repealed. This is doomsday thinking but keeping the average in my pocket until there is more evidence that my premise in this article is wrong. It is now very easy to put an end to funds flow analysis. It's simple to be easy to understand. But we need to think about how this could happen. There is no doubt that the market has noticed the Fourth Industrial Revolution. As a student of Nvidia CEO Jensen Huang and a happy one, I find this logic sound. Why not stick with stocks at the center of the AI boom, like Intel, Arm, AMD, Corning and Qnity? Why walk away from Texas Instruments and Lam Research? He represents data center conglomerates Amazon and Alphabet. If you don't have these, you are definitely not a believer. Notice that I didn't include Nvidia? Because Nvidia is not a choice. This is a must. On the surface, it seems odd that a privilege would stand this long until last Friday. But sometimes this grizzled trader knows wretched trade when he sees it. There are a lot of sellers who are out of stock. I'm talking about a few sellers who undoubtedly own more than 10 million shares. These sellers lived at $90 but sold most of their shares at $200. When a stock suddenly rises from $200 to $208 without any news, it means that the sellers are in the clear. What you have to realize is that the proceeds from the shares sold are either thrown away or flowed back into another vein of the data center's heart, perhaps distribution, connectivity, or back to GE Vernova, the Mac Daddy of the group, which makes machines that convert natural gas into electricity. It also builds and supports nuclear reactors as a source of electricity for its AI structure. There are only a few more nuclear games, and most of them are imaginary. You need to know how rare this cordoned flow of money really is. He doesn't just stray. It looks like he will go for cash if he leaves the group. There is no net underneath. Normally, I wouldn't be so bothered by this capital isolation if it weren't for what was waiting for me in the background: the initial public offerings of SpaceX, OpenAI, and Anthropic. First, SpaceX will undoubtedly be such a powerful magnet that it will pull money out of the S&P 500 to buy it. Nvidia will certainly suffer from both investors selling its shares and outflows from the S&P 500. The overpayment to SpaceX will be so huge that it will require an investigation into how the IPO process works. My hope is that Anthropic and OpenAI are delayed either because of OpenAI's odd ownership structure (a nonprofit controlling a for-profit company) or because Anthropic isn't short on money. We need this to happen for the market to continue moving forward. If these two step aside, we can look at SpaceX. Otherwise, this will lead to a stalemate in the market, but there will still be no reshuffling of the deck. Can the market really handle concentration? Yes, if there are not too many new companies entering the market. But this is very similar to the period from January 1999 to April 2000, when the only thing worth investing in was the internet, and companies such as Johnson & Johnson and Bristol Myers saw their P/Es shrink similarly. The April shift from online to healthcare stocks was driven not by the bond market, the usual culprit, but by the IPO market, where bankers pumped in more than 300 undervalued offerings. Supply killed that bull. So as long as there aren't too many IPOs and only the big three have SpaceX launches, we can get through this period without a seismic event. But a make-or-break moment is approaching: Wednesday, Alphabet, Amazon, Meta, and Microsoft will report (Apple on Thursday). Only Nvidia has a bigger impact on the market than these megacaps. If we get through next week with even two of these names being rewarding, Fourth Industrial Revolution investments will continue to be trendy throughout. (See here for a complete list of stocks in Jim Cramer's Charitable Trust.) 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