Jim Cramer says Intel stock stands out after tech selloff

Jim Cramer Intel stock commentary turned into a broader warning about tech on Sunday: investors are no longer rewarding artificial intelligence spending just because it is large. In a CNBC Investing Club column, Cramer said Friday’s drop in technology shares showed the market wants clearer evidence that AI capital spending can turn into profits.

Cramer said he believes the selloff may be the most significant pullback in tech in more than a year. His concern centers on whether the big AI spending cycle by large cloud companies is slowing, or whether the market is only going through a short reset after a long run in tech shares.

For his Charitable Trust, the portfolio used by the CNBC Investing Club, Cramer said he has been reducing exposure to traditional tech areas such as semiconductors, software and data centers. He said the portfolio has been shifting toward other tech-linked sectors, including pharma and aerospace.

Why does Jim Cramer like Intel stock now?

Cramer said Intel has become the traditional tech name he prefers because he expects demand to shift toward central processing units, or CPUs. A CPU is the main chip that handles general computing tasks, while a graphics processing unit, or GPU, is a chip widely used to train and run AI systems because it can process many calculations at once.

According to Cramer, Intel CEO Lip-Bu Tan told him Thursday that the data center chip mix has moved from roughly four GPUs for every one CPU when Tan took over to about one CPU for every one GPU now. Cramer said Tan expects data centers eventually to use four CPUs for every GPU.

That shift matters because Nvidia dominates the high-margin GPU market, while Intel and Advanced Micro Devices are major CPU suppliers. Cramer said GPU margins are richer today, but he argued a stronger Intel could benefit if CPUs regain a larger role in data centers, AI agents and robotics.

Cramer also pointed to Intel’s manufacturing ambitions. He said Tan understands foundries, which are factories that make chips, and chip packaging, the process of combining components to improve performance as shrinking chip features becomes harder.

AI spending is under pressure

Cramer tied the tech selloff to investor frustration with capital expenditures, or capex, which means money companies spend on long-term assets such as data centers and chips. He said Alphabet’s stock came under pressure after Google raised capex again, even though Google Cloud had what he described as a very strong quarter.

Alphabet executives said the spending increase was needed to meet demand, according to Cramer. He said the market is looking for proof that spending will produce profits, rather than only higher capacity.

He also said Apple’s recent stock action shows investors are rewarding a different approach. Cramer said Apple is having its best month in three years and argued the company has benefited from not committing hundreds of billions of dollars to AI infrastructure in the same way as some cloud rivals.

What comes next for big tech earnings?

Cramer said the next test will come from other large cloud and AI companies. Amazon, Meta Platforms and Microsoft are scheduled to report earnings this week, and Apple is also due to report, according to the CNBC column.

He said one strong report with raised guidance from a major hyperscaler could change the market’s view. A hyperscaler is a large cloud operator, such as Amazon, Microsoft or Google, that runs data centers at enormous scale.

Cramer disclosed that his Charitable Trust is long Intel, Nvidia, Apple, Amazon, Meta and Microsoft. He said he is not giving up on Nvidia and expects the company to post a strong quarter, but he also said the market action is pushing him to keep tilting away from traditional tech except for Intel.

This story draws on original reporting from CNBC.