We recently published a list of Jim Cramer’s Latest Calls: Top 10 Stocks. In this article, we are going to take a look at where MicroStrategy Incorporated (NASDAQ:MSTR) stands against other stocks that Jim Cramer discusses.
Jim Cramer in a recent program on CNBC discussed the massive tech sell-off on the back of a new AI LLM model from Chinese startup DeepSeek. Cramer was frank and honest about the level of confusion in the market and said he does not know the implications of the new model on US tech stocks given the lack of data and specifics. He thought out loud about the factors that can weigh on US companies after the breakthrough achieved by DeepSeek:
“There could be some serious buyer’s remorse now. Maybe all the spending going to (Jensen Huang’s company) was needless overpay. Maybe the gigantic number of data centers being built, which are a huge driver of growth in our country, simply aren’t needed. Maybe all the cooling process expenses are a big mistake. Maybe the rush to reopen old nuclear plants, put up more renewable generation, and even bring back coal is totally unnecessary. Today, the air went out of every one of these balloons.”
Cramer said he’d be looking out to know how many chips DeepSeek required to reach this software breakthrough to gauge the impact on demand for US AI chip companies. He said stocks could either rebound from all of this or continue to slide:
“And whether numbers now have to come down because there will be a freeze in spending as clients reassess those multi-billion dollar orders. Maybe it’ll be like the pause in the internet build-out of 2000 that turned out not to be a pause at all, but a collapse.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
For this article, we picked 10 stocks Jim Cramer recently talked about in his programs on CNBC. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A software engineer wearing a headset, collaborating with a remote team on a project.
MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Investors: 25
When asked about MicroStrategy Incorporated (NASDAQ:MSTR), Jim Cramer said in a latest program that if investors want exposure to bitcoin, they should just buy bitcoin and stay away from MicroStrategy.
“Look, I say if you want to own Bitcoin, own Bitcoin. I own Bitcoin; you should own Bitcoin. Bitcoin is a great thing to have in your portfolio, but not MicroStrategy Inc (NASDAQ:MSTR)—just own the Bitcoin, that’s enough.”
MSTR is a risky stock. Why? MicroStrategy Inc (NASDAQ:MSTR) has become the largest corporate holder of Bitcoin, with a current valuation of approximately $48 billion for its 461,000 BTC as of January 2025. This represents about 2.2% of the total Bitcoin supply. A 70% drop in Bitcoin’s price could lead to an 80%-90% or greater decline in MicroStrategy Inc (NASDAQ:MSTR) stock, as Bitcoin has historically dropped by 70%-80% after post-halving price peaks.
MicroStrategy Inc (NASDAQ:MSTR) revenue is down 7.35% year-over-year for the last trailing 12 months and 10.3% year-over-year for Q3 2024. While its BI software segment is growing, it cannot rise to significant levels and makes up for a very small portion of the overall revenue.
Greenlight Capital stated the following regarding MicroStrategy Incorporated (NASDAQ:MSTR) in its Q4 2024 investor letter:
“There is an open debate as to whether Bitcoin will at some point enter the mainstream as an official currency. In fact, there is a bill before Congress for the U.S. to establish a “Strategic Bitcoin Reserve” and buy one million Bitcoins over five years. The bill’s purpose appears to be the use of public funds to ramp up the price of Bitcoin, thereby enhancing the wealth of existing Bitcoin holders. This seems a dubious use of taxpayer funds, but the new administration has a lot of Bitcoin-owning supporters, so it might happen. More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in Bitcoin and that there is, in fact, nothing strategic about doing so.
One of the biggest owners of Bitcoin is MicroStrategy Incorporated (NASDAQ:MSTR). While MSTR owns a small software business, its principal pursuit is buying Bitcoin. In practice, MSTR is an investment company that buys and holds Bitcoin.2 MSTR trades at a large premium to the value of the underlying Bitcoin it holds. The idea is to raise money from new investors at a premium and use the proceeds to buy more Bitcoin. Since the Bitcoin that MSTR buys costs less than the Bitcoin-implied value of MSTR’s stock, the new investment is dilutive to new investors but accretive to existing investors. MSTR’s promoters have labeled the return to existing investors created by this scheme the “Bitcoin yield”. As Bitcoin itself yields nothing, the Bitcoin yield is simply a measure of the Ponzi finance’s effectiveness. Lately, it has been pretty effective.”
Overall, MSTR ranks 10th on our list of stocks that Jim Cramer discusses. While we acknowledge the potential of MSTR as investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSTR 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.