In this piece, we will look at Jim Cramer’s bold predictions about these semiconductor stocks.
Semiconductor stocks were once again at the forefront of media and investor attention this week during the stock market selloff triggered by investor apprehensions about lower AI development costs courtesy of China’s DeepSeek AI models. Because AI has dominated headlines for more than a year now, most of Cramer’s attention during his morning appearances focused on the technology whether it was before or after the selloff.
Before the selloff, on Friday, the CNBC TV show host started out by discussing the applications of AI. While most of the public’s attention is focused on chatbots, AI’s business use cases are quite diverse. One such use case is in the healthcare industry and another comes through the financial services sector. Cramer commented on both of these:
“I think that what we’re not thinking about, like when I went to Jensen Huang’s panel on healthcare. It’s so much bigger than anything involving AI PC. I mean they’re really just talking about having the data to really attack every single disease and changing it from fatal to maintenance. You have tremendous number of people involved in trying to do that. Then you have Stripe there working with [the GPU company] to be able to do something revolutionary in finance. And then you have the banks working doing some revolutionary things trying to get people who’re doing S1s. . . .”
The DeepSeek AI selloff was notable particularly because of the impact on the shares of Wall Street’s favorite AI GPU company. The firm, which was the world’s most valuable company ahead of the selloff, bled close to $600 billion in market value and lost its top spot to the company behind the iPhone. For Cramer, while the lower AI development costs were commendable, the use cases for the AI GPU firm’s products were beyond large language models:
“Well, look, there’s no doubt about the cost is great for this. But if you’re gonna go forward and you’re gonna do what Jensen was talking about, which is anything physical, anything physical with Blackwell. It’s going to be better than what we do. I’m just saying that Jensen’s on a plane of his own. And that, if you have low commodity, Jensen’s got the three thousand dollar chip that can handle that. Was I shocked by this? No it was nice that they came up with such a low price.”
For semiconductor stocks, one AI-generate catalyst that did not materialize is the AI PC. These PCs use a special chip called a neural processing unit (NPU) along with CPUs and GPUs to run AI tasks. In an appearance before the DeepSeek selloff, Cramer mentioned a Morgan Stanley report that shared that 60% of people surveyed had accidentally bought an AI PC and more than 60% were uncomfortable paying extra for AI products. The report, which added that just 15% of the respondents had bought a new product because of AI was “perhaps the most damming piece” that Cramer had read.
He shared that “There’s absolutely no evidence of a super cycle whatsoever,” and cycled back to enterprise AI use cases by stating “I mean I think AI is very good when you listen to what Jamie Dimon [inaudible] to say, that AI is very good when you listen to what Marc Benioff has to say.”
Cramer added that not only was he wrong about the AI PC cycle as the PC he “thought we were all gonna upgrade. And now we’re all in wait-and-see mode,” but those who he knew had bought such a PC “haven’t used it or there’s a button there and it doesn’t work.”
Our Methodology
To compile our list of Jim Cramer’s bold predictions about stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street after September 2024. Then, we picked out semiconductor stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
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).
9. STMicroelectronics N.V. (NYSE:STM)
Number of Hedge Fund Holders In Q3 2024: 18
Date of Cramer’s Comments: 10-04-24/10-07-24
Performance Since Then: -19.70%
STMicroelectronics N.V. (NYSE:STM) is an industrial and automotive chips provider. Naturally, this leaves the firm vulnerable to broader global economic performance. Over the past year, the shares have lost 48.3%, and since Cramer’s remarks, they are down by 19.70%. January, in particular, hasn’t been a great month for STMicroelectronics N.V. (NYSE:STM)’s shares as they are down by 6%. The stock dipped by 8.9% on Wednesday after the firm refrained from providing guidance due to dim prospects of economic recovery. In his October remarks, Cramer shared:
“I think it’s fine.”
8. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders In Q3 2024: 57
Date of Cramer’s Comments: 10-18-24
Performance Since Then: -6.7%
Texas Instruments Incorporated (NASDAQ:TXN) is an American chip company that makes and sells embedded and analog chips for industrial, data center, and other use cases. The diversified product portfolio means that the firm is exposed to AI and non-AI spending. Since Cramer’s remarks, Texas Instruments Incorporated (NASDAQ:TXN) shares have lost 6.7%. This is because a large portion of its revenue is dependent on industrial firms. In fact, during H1 2024, 76% of the revenue was through these companies. Texas Instruments Incorporated (NASDAQ:TXN)’s shares lost 7.4% in January after a weak earnings report and shed another 3.5% during the DeepSeek selloff. Here’s what Cramer said in October:
“After the close, we hear from Texas Instruments. We’ve been hearing a lot about how semiconductor companies are in the doldrums, the ones without AI, that is. Tex Instruments falls into that category but this company’s become much more focused. I like it ahead of the quarter, even though it has a little more cyclicality than most chip makers.”