Big winners of today's rally are heavily involved in data centers, says Jim Cramer
Speakers
Jim Cramer -- 'Mad Money' Host
— CNBC host, Mad Money
Summary
- Jim Cramer expresses skepticism about the current market rally, describing it as narrow, limited, and lacking broad leadership.
- The rally is driven primarily by stocks involved in data centers, including memory, fiber optics, and semiconductor companies.
- Memory companies (Western Digital, SanDisk, Seagate, Micron) are sold out near-term due to AI-driven data storage demand and cannot expand capacity quickly, which may support stock prices.
- Fiber optic plays (Lumentum, Coherent, Sienna) benefit from data center infrastructure needs, with NVIDIA investing $2 billion in Lumentum and Coherent, cementing their role.
- Intel leads semiconductor gainers due to buying back a facility, signaling financial strength and a rock-solid balance sheet.
- Teradyne appears on the gainers list for semiconductor test equipment, further highlighting the narrow focus of the rally.
- Newmont Mining is a non-data center stock among winners, which Cramer views as a disappointment and inferior to peers like Agnico Eagle.
- Cramer contrasts these with growth stocks like NVIDIA, which he says deserves a premium P/E multiple but has been inactive lately.
- The market needs broader leadership from growth stocks, but current winners are constrained by capacity issues and lack of production growth.
Trade Ideas
Cramer stated that memory companies are sold out near-term, can't build capacity fast enough, and their stocks might continue to roar higher. High demand for data storage from AI and data centers, coupled with limited supply expansion, drives price increases and stock appreciation. LONG due to expected continued stock price growth from supply-demand imbalance. Development of new storage technologies or faster capacity expansion could alleviate shortages.
Cramer said NVIDIA deserves a premium price-earnings multiple but hasn't done much lately. Despite strong fundamentals and premium valuation, recent inactivity suggests it may be consolidating or awaiting catalysts. WATCH because it has potential but current performance is stagnant, warranting monitoring for entry points. Renewed growth momentum or market re-rating.
Cramer called Lumentum, Coherent, and Sienna "good investments" and part of data center plumbing, with NVIDIA investing $2 billion in Lumentum and Coherent. Data center growth increases demand for fiber optics for data transport, and strategic investments validate their importance. LONG because they are well-positioned to benefit from data center expansion. Slowdown in data center build-out or technological disruption.
Cramer said Intel is leading due to buying back a facility, which is a sign of strength, and its balance sheet is now rock solid. The buyback indicates improved financial health and confidence, likely leading to positive stock performance. LONG based on strengthened fundamentals and balance sheet. Competitive pressures or execution missteps.
Cramer described Newmont Mining as a "classic letdown" and not the best gold miner, preferring Agnico Eagle. As a non-growth, non-data center stock among winners, it fails to meet investment criteria for growth-oriented markets. AVOID because it is perceived as an underperformer relative to peers and market theme. Surge in gold prices or company-specific improvements.
