Wall Street flees AI chip winners, rotates into software and retail

Jim Cramer told CNBC on Tuesday that Wall Street is executing a strategic rotation out of the year's biggest AI infrastructure winners into stocks of companies with growth drivers independent of data center buildout cycles. The move, which Cramer characterized as either a "broadening" or a "fleeing," reflects a repricing of unsustainable profit margins in memory chip makers. Micron, Western Digital, Seagate, and SanDisk all surged in the first half of 2024 as shortages of memory used in AI servers gave them unprecedented pricing power. Western Digital exemplified the move: the stock hit an all-time closing high of $746 per share on June 18, at which point it had gained 333% for the year. Less than six weeks later, it had fallen nearly 40% from that record. Cramer argued that this pullback was inevitable, drawing on his long experience with boom-bust cycles in semiconductor suppliers. "You have to sell the parabolic moves that these shortages trigger because they always end," he said, noting that "the stocks just anticipate the ending." Rather than abandon equities, investors are redeploying capital into companies whose growth is less dependent on continued AI infrastructure spending. Even software companies that had been beaten down—ServiceNow and Salesforce—are rising again, up roughly 11% and 16% month to date, respectively. Retail names like Costco and Walmart have also been "in the sunshine," as Cramer put it, making a run lately. Johnson & Johnson also hit an intraday all-time high Tuesday, buoyed by news Monday night that it had reached a $5.5 billion（約8800億円） settlement to resolve ovarian cancer litigation over its talc products, well below the roughly $8 billion（約1.3兆円） proposal a judge had rejected two years earlier. Cramer stressed that he remains bullish on Nvidia and Intel despite the broader pullback in AI-tied stocks, reasoning that their businesses rest on durable demand rather than the temporary pricing power that lifts memory makers. His Charitable Trust portfolio, run by CNBC's Investing Club, owns shares of Salesforce, Costco, Johnson & Johnson, Intel, and Nvidia.

The rotation Cramer describes reflects a fundamental repricing of AI-related valuations as the market matures. Memory makers like Western Digital benefited from an acute shortage of chips used in AI servers, a temporary supply constraint that inflated profit margins and stock prices. Western Digital's 333% gain in the first half of the year was built on the assumption that these shortages would persist; the nearly 40% decline since June suggests investors now expect supply to normalize and pricing power to evaporate. Cramer's framing—that this is not panic but redeployment—matters: capital is not leaving equities but moving to companies whose growth does not hinge on the continuation of a supply crisis. Software companies and retailers offer earnings visibility less tied to the boom-bust cycles that plague hardware manufacturers during shortage periods. His distinction between durable demand (Nvidia, Intel) and temporary pricing power (memory makers) is grounded in business fundamentals: semiconductor design and manufacturing platforms benefit from ongoing AI adoption regardless of whether individual components face shortages, whereas suppliers of commoditized memory chips face margin compression as production catches up to demand.

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