CNBC’s Jim Cramer said the ferocious rally in semiconductor and AI stocks may be sending a warning signal to the broader market.
“Recently, we’ve been seeing some parabolic movement across the market,” the “Mad Money” host said. “That’s worrying.”
It was after his historic run that he became cautious. Philadelphia Semiconductor Indexoften referred to as SOX, rose for 18 consecutive sessions before collapsing on Monday, the longest winning streak in history. The index rose more than 47% during this winning streak.
Kramer believes such moves are rare and potentially problematic.
Despite Monday’s drop, the index rose 37% in April. If the month ends at current levels, it would be the second-best month in the index’s history, behind February 2000, just before the dot-com bubble burst, Cramer said.
The comparison has not gone unnoticed on Wall Street. Analysts at Goldman Sachs recently said the index is trading about 50% above its 200-day moving average, a key momentum indicator used by technical strategists. This is the highest level of expansion since 2000, according to Goldman. Meanwhile, Morgan Stanley warned that semiconductors are among the most overbought in history and the group could exit in the short term.
For Kramer, the bigger concern is how widespread the gatherings are. A wide range of stocks related to AI infrastructure and data centers posted similarly sharp gains in short periods of time. a name like advanced micro device, Arista Networksand marvel technology It has soared more than 50% since late March.
“This kind of movement is worrying,” he said, warning that the sharp rally could quickly reverse if expectations outweigh fundamentals.
he pointed to POET Technologies As an example. Shares fell sharply on Monday after a major potential customer canceled a purchase order, highlighting how quickly sentiment can change when expectations outweigh fundamentals. Cramer last week advised investors not to chase POET stock’s dramatic rise, saying the company’s business was too speculative.
To be sure, Kramer isn’t asking investors to exit the market. Instead, he advocates a more cautious approach.
“I don’t want to overreact,” he said. “But we have taken some steps at the water’s edge.”
That includes cutting back on big-winner positions in his charitable trust, a portfolio run by CNBC Investment Club, and avoiding the temptation to chase stocks that are already going parabolic. He added: arm holdingsit may be better to buy back in value as it remains attractive in the long run.
“Let’s narrow down some winners…don’t chase parabolas…and wait to see if we see a more moderate rebound from the wild conditions of the last few weeks,” he said.
Disclosure: Cramer’s Charitable Trust, a portfolio used by CNBC Investing Club, owns shares of Arm Holdings.
