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.”
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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).
10. MicroStrategy Inc (NASDAQ:MSTR)
Number of Hedge Fund Investors: 25
When asked about MicroStrategy Inc (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.”
9. Ford Motor Co (NYSE:F)
Number of Hedge Fund Investors: 36
Jim Cramer in a recent program on CNBC told investors about the issues with Ford Motor Co (NYSE:F).
“All right, here’s the problem with Ford Motor Co (NYSE:F): they’ve got big warranty issues, and they’re all coming back to haunt them because it costs so much to fix the cars. I’ve got to tell you, autos are a part of the economy where people are saying, “We need rate cuts, we need rate cuts.” And Ford Motor Co (NYSE:F), in particular, trading at five times earnings, tells me something is wrong there.”
Ford’s Model e segment is burning a lot of cash and faces intense competition. For the year-to-date period, Ford Motor Co (NYSE:F) EBIT has dropped to $8.1 billion from $9.4 billion a year ago. The stock is also seeing major downward revisions to its EPS for the next few quarters. Over the past three quarters, cumulative losses in this segment have reached $3.7 billion, up from $3.1 billion last year.
8. BlackRock Inc (NYSE:BLK)
Number of Hedge Fund Investors: 37
Jim Cramer in a latest program on CNBC recommended investors to buy BlackRock Inc (NYSE:BLK) shares and said BLK is a “fundamental” holding of his charitable trust.
“BlackRock Inc (NYSE:BLK) is a fundamental position for the portfolio in my Charitable Trust. The way this stock works is it has a big move, then it rests, another big move, then it rests. Overall, the long-term growth rate is fabulous, and I think it’s going to stay that way. I’d like you to buy the stock.”
The London Company Large Cap Strategy stated the following regarding BlackRock, Inc. (NYSE:BLK) in its Q3 2024 investor letter:
“BlackRock, Inc. (NYSE:BLK) – Shares of BLK rallied during 3Q as organic growth improved sequentially. Our long-term view of BLK has not changed. In the near-term, strong equity market performance is supportive of AUM and fee growth, and, visibility on declining interest rates is a potential tailwind to the fixed income ETF business. We continue to view BLK as a long-term share gainer with a broad spectrum of solutions, and we appreciate the strong balance sheet and steady capital return.”
7. Coterra Energy Inc (NYSE:CTRA)
Number of Hedge Fund Investors: 39
Jim Cramer was recently asked about Coterra Energy Inc (NYSE:CTRA) in the Lightning Round segment of his program on CNBC. Here is what he said in response:
“We sold a little Coterra Energy Inc (NYSE:CTRA) because it’s been up in a straight line—it was in a parabolic move. Now we’re watching and waiting. But I do think it’s the cheapest natural gas company, which is very good for a president who wants to export natural gas.”
Diamond Hill Mid Cap Strategy stated the following regarding Coterra Energy Inc. (NYSE:CTRA) in its Q3 2024 investor letter:
“Among our bottom Q3 contributors were Civitas Resources, Coterra Energy Inc. (NYSE:CTRA) Energy and Ashland. Oil and gas exploration and production companies Civitas Resources and Coterra Energy were pressured against a backdrop of weakening future global oil demand, which weighed in turn on West Texas Intermediate (WTI) and Brent crude prices and, consequently, the energy sector overall.”
6. Digital Realty Trust Inc (NYSE:DLR)
Number of Hedge Fund Investors: 52
Jim Cramer in a latest program on CNBC said Digital Realty Trust Inc (NYSE:DLR) is an “overheated” stock amid the data center boom and he wants investors to wait before buying it.
“I want you to wait until that comes down. That’s another stock that got overheated because of the data centers. We cannot, we cannot, we cannot get involved with a parabolic move of a stock that could go much lower. It’s at a 2.9% yield—I think a 4% yield is probably right for that one.”
5. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Investors: 69
Jim Cramer was recently asked about Chipotle Mexican Grill, Inc. (NYSE:CMG). Cramer recommended investors buy and hold the stock.
“Somebody came out today and said they think the growth rate for next year won’t be that high. That was a devastating call, and what did the stock do? It went up anyway. My take is this: I think Scott Boatwright is doing a good job. I have no desire to trade Chipotle Mexican Grill, Inc. (NYSE:CMG)—that’s been a sucker’s game. Let’s just own it. If it comes down, we’ll buy a little more. That’s the Chipotle story—it’s not a trade; it’s an investment.”
Chipotle has offered strong guidance for FY2025, projecting 315 to 345 new company-operated restaurant openings. The company has also sustained its high single-digit growth trend while maintaining a strong balance sheet. Its cash position stands at $698.54M (down 13.3% QoQ, up 15.9% YoY) with no significant debt.
ClearBridge Growth Strategy stated the following regarding Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q4 2024 investor letter:
“We also initiated a position in fast casual restaurant chain Chipotle Mexican Grill, Inc. (NYSE:CMG). The recent pullback in shares related to a moderation in industry-wide restaurant sales and CEO Brian Niccol’s August departure created an attractive entry point into a company with industry-leading unit economics in a still underpenetrated market. Chipotle plans to double its store footprint over time while executing initiatives to increase volume growth through technology enhancements, reduced mobile order friction and higher production during peak hours. Better throughput, technological integration and improved mix should help to drive continued margin expansion. Chipotle further diversifies the portfolio, adding to consumer discretionary where we have historically had less exposure.”
4. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Investors: 91
Jim Cramer was asked about Vertiv Holdings Co (NYSE:VRT) in a latest program on CNBC. Cramer warned that the stock can see another selloff in the coming days:
“I have to tell you, that stock fell so much that here’s what’s going to happen: when you see a stock drop $43 on a $150 basis, it means the sellers aren’t done. They’ll come back again tomorrow, break the chart, and make things happen that will make you wish you bought the stock at 80, not 100. That’s typically what happens.”
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q3 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) is a leader in data center equipment, with significant share in both power and cooling applications. The stock rebounded off recent weakness, as investors gained confidence that a massive build out of AI data centers globally was on the horizon. Vertiv’s strong relationship with chip manufacturers and involvement in the necessary technology roadmap for solutions as the energy density of server racks increases were catalysts. Vertiv’s orders were up 57% year-over-year in the second quarter, backlog was $7 billion, a record, and 2024 operating profit margin and EPS guidance was raised.”
3. Danaher Corp (NYSE:DHR)
Number of Hedge Fund Investors: 98
Jim Cramer was recently asked about Danaher Corp (NYSE:DHR) on CNBC. Cramer praised the company’s management and said he likes the company “very much” but said there has been “underperformance” and shareholders are getting “restless.”
“I think those guys are great—the Rales brothers are amazing. Even when I’m moody, you know, they have Rales stake there and the commander, so I love them even more. But here’s what I mean by that: I want them to show me they understand there’s been some serious underperformance here. They could come back and say, “We’ve outperformed for so many years, Jim, give us patience.” I just want something that shows me they understand we’re getting restless. I think that’s a reasonable thing to say, and I do like them very much.”
Parnassus Growth Equity Fund stated the following regarding Danaher Corporation (NYSE:DHR) in its Q3 2024 investor letter:
“In Health Care, we continue to favor catalyst-rich names across subsectors, including medical devices, biopharma, life science tools and payors companies. We chose to consolidate our exposure in the Life Sciences Tools and Services industry by selling Danaher Corporation (NYSE:DHR) while maintaining our position in Thermo Fisher Scientific.
Our position in Danaher has been profitable, and we have opted to consolidate our life science tools bet in Thermo Fisher Scientific. Danaher has rerated since we initiated our position, and we believe the anticipated 2025 bioprocessing recovery is largely priced in.”
2. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Jim Cramer in a recent program on CNBC talked about the massive selloff that rocked NVIDIA Corp (NASDAQ:NVDA) shares after the launch of DeepSeek. Cramer was frank about the confusion and concerns around NVIDIA Corp (NASDAQ:NVDA) stock and said a lot needs to be known before making any claims about the Nvidia story. Cramer was worried about why NVIDIA Corp (NASDAQ:NVDA) did not emphasize its software focus and its chip demand in its statement after the DeepSeek launch.
“It’s part of the confusion and the real quandary is why did NVIDIA Corp (NASDAQ:NVDA) say that it’s become much more of a software company and that you need the hardware to run their software. It also would have been good to find out how many chips DeepSeek is really using. But it isn’t. Think about it—if it was a lot, right, then our government would simply ban all exports to China. What a high-risk situation. If you’re NVIDIA Corp (NASDAQ:NVDA), you’re really in a jam here.
See, if DeepSeek really didn’t need many chips to make its AI platform work, that could be very negative for the NVIDIA Corp (NASDAQ:NVDA) story because then you don’t have to order as many chips. But if it turns out that DeepSeek had hundreds of thousands of chips like the American hyperscalers, then you’d have to believe the new president would make it much harder for Chinese companies to buy anything.”
Infuse Asset Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“We do still own some NVIDIA Corporation (NASDAQ:NVDA) as the forward multiple isn’t egregious and it powers over 90% of AI workloads. This company is only becoming increasingly important though the hyperscalers are actively trying to save money through their own ASIC programs. The moat CUDA provides has been underestimated time and time again. While I don’t think Nvidia has quite the upside as some of the other companies in the portfolio, it has a product that the best companies in the world literally can’t get enough of.”
1. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 198
Jim Cramer in a latest program on CNBC revealed his charitable trust sold some Broadcom Inc (NASDAQ:AVGO) shares but said the stock is no longer expensive after the DeepSeek-triggered selloff.
“Not that long ago, we sold some Broadcom Inc (NASDAQ:AVGO) for the Charitable Trust at a much higher price than where it is today. If this one stabilizes, I think it might be a buy because they have a lot of business outside the data center. After this decline, the stock’s no longer expensive. However, I don’t know—it could be a freight train.”
Munro Global Growth Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) contributed 94bps to Fund performance for the quarter. Broadcom is a fabless semiconductor company that designs semiconductors for a range of different industries and applications, based in Palo Alto, California. The company plays an important role in providing semiconductors for AI, specifically, they provide hyperscale data centre companies custom silicon chips. Over time, as companies such as Meta, Alphabet, Amazon and Microsoft build out their AI offering, the critical semiconductor content will come from both custom silicon chips, designed by companies such as Broadcom, and merchant silicon chips, designed by Nvidia. Depending on the use case, or workload, the hyperscaler will use either a custom silicon semiconductor or a merchant silicon semiconductor. Therefore, over time we expect AI processes to be driven by both Nvidia designed chips and custom designed chips from Broadcom and its peers.
On their recent earnings call, Broadcom CEO Hock Tan confirmed that the company’s customers are rapidly pursuing the development of a 1 million XPU cluster of chips. To translate what this means for Broadcom, Hock laid out the Serviceable Addressable Market (SAM) opportunity for the company’s AI revenues over the next 3 years to 2027. In 2024, Hock noted that Broadcom’s SAM was $15-20bn USD, of which the company commanded an approximate 70% share. In 2027, that SAM is expected to grow to $60-90bn USD, and assuming Broadcom captures an approximate 60% share, this gives rise to $50bn USD of AI revenue opportunity for the company over the next 3 years. For the company overall, this means that revenue has the potential to double over the next 3 years. We believe the technology road map outlined by Broadcom and the resulting revenue opportunity gives rise to a multi-year runway of earnings growth backed by a large structural change.”
While we acknowledge the potential of Broadcom Inc. (NASDAQ:AVGO), 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 AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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