We recently published an article titled Jim Cramer Discusses These 10 Stocks & Says He’s In Waiting For AI GPU Spending Clarity. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks Jim Cramer recently discussed.
In his latest appearance on CNBC’s Squawk on the Street, Jim Cramer commented on whether the low AI development costs demonstrated by China’s DeepSeek AI models would upend investor expectations of AI spending. Ever since the AI wave kicked off in November 2022, businesses have committed and spent hundreds of billions of dollars to procure AI GPUs and develop data centers to host them. The high spending requirements also led President Trump to announce a massive $500 billion Stargate project earlier this month.
However, data center stocks crashed on Monday and wiped out a trillion dollars of value as investors worried whether low AI development costs would mean that this spending would not materialize. Cramer is divided about the overall sentiment when it comes to AI spending after the DeepSeek selloff.
He commented that the lower costs are “the theme of the moment because some people saw it coming.” Cramer added “and yet they still ordered. That would be the Zuckerberg case, maybe the Musk piece.” On the other hand, he outlined that others “just say oh my, what am I in, I’m gonna go buy a double short NVIDIA.” Finally, the CNBC host also shared a third category of people “who think that it’s [Wall Street’s favorite AI GPU stock] a hand cream.”
While investors fretted about lower AI costs translating into weaker demand for items such as GPUs, another narrative questioned whether lower costs meant that AI development would open up to more firms and entities than the higher costs had previously permitted. Cramer admitted that this was possible, but added that it also meant that perhaps “the monopoly rent that people feel that” the premier GPU company “was charging is gone.” He added that he was in wait-and-watch mode when it came to AI spending.
Cramer noted several events that could signal to him that perhaps the narrative shift surrounding AI spending was permanent. One of his tests “test would be, uh, is, Three Mile Island not going to be reopened? That would be one I need to hear.” The second driver that might convince the CNBC TV show host of a paradigm shift for AI spending would be reports of “any [GPU] order pullback. And I have not heard that yet.” Cramer added “But that’s not, necessarily, what people are going to announce, ‘listen, I’ve decided. . . If this thing only needs one-tenth of the power, one-tenth of the compute, well I’m going to cut my orders by nine-tenths.’ I’ve not heard that yet, but this thing is. . . a steamroll.”
Our Methodology
To make our list of the stocks that Jim Cramer talked about, we listed down the stocks he mentioned during CNBC’s Squawk on the Street aired on January 29th and mentioned in his Morning Take from his Investing Club morning meeting.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders In Q3 2024: 279
Microsoft Corporation (NASDAQ:MSFT) is the most valuable software company in the world and the second most valuable firm overall following the DeepSeek selloff. Yet, the firm’s shares have lost 11% since their peak in July last year primarily on the back of investor worries about its AI initiatives not delivering profit fast enough to warrant the billions of dollars already spent in capital expenditure. Microsoft Corporation (NASDAQ:MSFT)’s latest earnings led to the stock crashing by 6% as it forecast a midpoint of 31.5% growth for its Azure cloud business that fell below analyst estimates of 33%. Ahead of the earnings, Cramer was worried about Microsoft Corporation (NASDAQ:MSFT)’s valuation multiples:
“Look I watched Brad Gerstner yesterday. There’s a sense that the multiple has become very low. So it’s actually one of the lowest at Microsoft.”
Overall MSFT ranks 2nd on our list of the stocks Jim Cramer recently discussed. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
