Important points
CNBC’s Jim Cramer said Wednesday that signs of excessive speculation are creeping into the market, echoing a pattern that has led to painful losses for investors in the past. “Remember last year when speculative stocks took over the market,” the “Mad Money” host said, noting that the wave of speculative companies that rode on the hype and soared ended up capsizing and taking investors with them. After strong broad-based market gains in recent weeks, Cramer said he thinks enthusiasm may be starting to outweigh discipline. “They think everything they buy is going to be more expensive…They’re completely undisciplined and cocky,” Kramer said. That “do no wrong” mentality is pushing money back into the same riskier areas of the market that caused problems earlier, particularly unprofitable nuclear power startups, quantum computing businesses and space stocks, he warned. Kramer acknowledged that these themes have long-term potential. However, he said he was concerned that many small pure-play brands currently lacked a viable business model. For investors still hungry for exposure to these industries, Kramer recommended owning stocks in established companies with complementary business lines and real profits, making them less speculative. Nuclear energy is “not great business,” Cramer argued, because building a nuclear power plant from scratch would be too expensive and time-consuming. He highlighted companies like Constellation Energy and GE Vernova as more reliable ways to gain exposure, citing their experience and scale. Constellation Energy is a diversified energy provider with hydro, wind and solar power generation assets, as well as a powerful nuclear facility. GE Vernova builds gas turbines and power grid infrastructure and has a nuclear power joint venture with Japan’s Hitachi. Kramer said that when it comes to quantum computing, the only “viable” businesses currently belong to large corporations such as software and computing giant IBM and industrial conglomerate Honeywell, rather than small and medium-sized companies that remain in “scientific projects.” Meanwhile, Cramer said the impending IPO of Elon Musk’s SpaceX will make it easier for the space industry to gain exposure. Mr. Kramer reserved his sharpest criticism for the people who buy Allbirds. The former shoe company announced plans on Wednesday to pivot its business to AI computing infrastructure, sending its stock up a whopping 582% in trading to $16.99 per pair. The company’s stock price fell 36% on Thursday, but still closed at $10.91 per share, well above its pre-frenzy closing price of $2.49. Rather than betting on Allbirds (which will be called NewBird AI), Cramer recommended investors focus on semiconductor powerhouses like Nvidia, Taiwan Semiconductor, and Intel to carry the AI computing boom. “The bottom line is this is a speculative bridge too far,” he says. Disclosure: Cramer’s Charitable Trust, a portfolio used by CNBC Investment Club, owns stock in GE Vernova, Honeywell, and Nvidia. Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
