CNBC’s Jim Cramer warned investors not to chase the stock. cerebral system After an explosive market debut on Thursday.
“There may be a situation in the future where I can recommend Cerebras, but I can’t even justify the valuation here given how much they’ve already achieved since they started,” the “Mad Money” host said. “For now, I’m just going to shoulder the bat and hope for a big rebound in the stock price, because at this level, there’s too much money for me.”
Cerebras debuted Thursday in the year’s biggest IPO. The AI chip maker’s stock price on Wednesday was $185, above its already elevated range of $150 to $160, and opened Thursday at $350. The company’s stock price ended the day at $311, giving it a market capitalization of approximately $95 billion. On Thursday, the stock hit a high of $386.
According to Kramer, the excitement is not completely unfounded. Founded in 2015, Cerebras has developed what it calls “the largest commercial chip in the history of the computer industry.” This processor is made from an entire silicon wafer and is specifically designed for artificial intelligence workloads. Cerebras said in its IPO prospectus that its processors can be “up to 15 times faster than leading GPU-based solutions” for certain workloads and “more than 10 times faster” for some AI training applications.
Mr. Kramer also pointed to several high-profile partnerships for Cerebras that could drive future growth. Earlier this year, the company announced a $20 billion, multi-year deal with OpenAI that will provide 750 megawatts of computing power, while Amazon Web Services recently agreed to deploy Cerebras chips alongside its own Trainium processors. Amazon and OpenAI both have warrants to buy Cerebras stock.
Earnings growth is also strong, Kramer noted. Cerebras generated $510 million in revenue last year, a 76% year-over-year increase, after sales more than tripled in 2023 and 2024. Although Cerebras remains unprofitable, Kramer said he’s not too worried because it’s growing very fast and has no debt.
But Cramer said investors shouldn’t overlook risks, most notably valuation.
More importantly, he argued, the stock’s valuation looks increasingly inflated following Thursday’s rally. At Thursday’s prices, Cerebras is trading at about 187 times last year’s sales, compared to Nvidia’s sales at about 26 times, AMD’s sales at about 21 times, and Broadcom’s sales at about 33 times.
“So, really, if you buy this stock here, you’re betting on the idea that Cerebra is going to have better growth for years to come,” Cramer said. “Honestly, at this valuation, you basically expect revenues to be several times what they are now in a fairly short period of time. Given the great technology the company has, that might be possible, but to me it really seems like a leap.”
