Not all technology companies stand to lose from a slowdown in data center construction. In fact, it could be exactly what Amazon needs to pull ahead, according to Jim Cramer . “If it’s going to be slower, that does work for the incumbents, hence why I would buy Amazon,” Jim said Monday morning on CNBC. A divide in the artificial intelligence trade has become increasingly apparent since last week’s midterm elections , as growing opposition to new projects raises concerns about future infrastructure spending. Amazon shares have surged 7% since the election, including Monday’s intraday gains. Other cloud incumbents such as Microsoft and Google parent Alphabet are solidly higher too. Meanwhile, semiconductor and neocloud stocks have suffered steep losses, with Micron tumbling 14.1%, Sandisk plunging 21.2% and CoreWeave falling 8.9%, when including Monday’s intraday bounce-back rallies. The strength in hyperscalers has helped fuel a broader technology rebound following last week’s sell-off. Despite weakness in Nvidia and other chipmakers, the Nasdaq has gained a combined 3.3% over Friday and Monday, recovering much of Thursday’s 5.5% plunge. “I think the Amazon move is very right,” Jim said. “I was talking about it going to $300.” That would represent nearly 10% upside from current levels. The recent rally marks a turnaround for Amazon, which had slumped over the last few months as investors grew tired of enormous AI spending. The stock briefly got hot in late July and into August, following the forced unwind of Situational Awareness and an encouraging second-quarter earnings report . But after closing at $284 apiece on Aug. 3, shares lost more than 15% through the end of October, ending that month at roughly $240. Cramer argued that a slowdown in development could benefit established cloud providers, which already operate extensive data center networks and could have the corporate heft needed to navigate any new bureaucratic obstacles. He compared the situation to a yellow flag in Formula One racing. “Everyone has to go slower, no one’s allowed to pass,” he said. “If that’s the case, that’s Microsoft and that’s Amazon winning.” Demand for AI computing power isn’t going away, even if new data centers become harder to build. Unlike smaller neocloud providers that rely on continued expansion to grow, Amazon and Microsoft already have massive infrastructure networks in place, positioning them to capture a larger share of demand as new capacity becomes harder to bring online. Jim also said that he likes that Amazon has been less reliant on neocloud providers to secure extra capacity to meet demand. A slower buildout would also ease pressure on the hyperscalers to keep accelerating capital spending, potentially allowing their free cash flow to recover and improving returns on their existing infrastructure investments. For investors, that makes the established hyperscalers better positioned to weather a slowdown than companies whose growth depends more directly on new data center construction. (Jim Cramer’s Charitable Trust is long AMZN, MSFT, MU, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
rahulNovember 9, 20262 Mins read2
