Artificial intelligence stocks staged a rebound on Monday, recovering some ground after a sharp selloff last week. The Nasdaq Composite gained 1.1%, while the Philadelphia Semiconductor Index rose 1.6%, ending an eight-session losing streak. However, CNBC's Jim Cramer cautioned investors against rushing back into the sector, saying the bounce alone does not signal the end of the downturn.
In his Sunday column for Investing Club subscribers, Cramer outlined four developments he wants to see before becoming aggressively bullish on AI stocks: improving technical charts, earnings from major tech companies, clarity following the US midterm elections, and progress toward an initial public offering by Anthropic. Despite his near-term caution, he reiterated his long-term belief in the AI investment thesis.
Technical Signals Still Weak
Cramer noted that the Nasdaq Composite and Nasdaq-100 have fallen below their 50-day moving averages, a key technical indicator. He wants to see these indices reclaim those levels to confirm that the recent selloff has run its course. A sustained recovery above those averages would offer a more reliable signal of improving market momentum.
Big Tech Earnings to Test AI Spending
The upcoming earnings season will be a critical test for AI infrastructure spending. SpaceX and Meta Platforms are scheduled to report this week, followed by Alphabet, Microsoft, and Amazon next week. Investors will scrutinize management commentary for signs that companies remain committed to their capital expenditure plans for data centers and advanced chips, despite growing questions about the timeline for profitability.
Cramer emphasized that the market needs to see evidence that AI investments can ultimately generate sustainable profits, not just drive demand for more computing capacity. He pointed to Anthropic's potential IPO as a key indicator of whether public-market investors are willing to support current valuations.
Anthropic IPO Could Provide Reality Check
Anthropic, the developer of the Claude AI models, is reportedly considering a valuation of around $1.5 trillion for a potential November listing, below the roughly $2 trillion figure previously anticipated. The eventual valuation could offer a reference point for assessing the financial prospects of major AI developers and whether the sector's expectations are justified.
Elections Add Uncertainty
Cramer also highlighted the upcoming US midterm elections as a source of uncertainty. He predicted that the outcome could initially trigger additional selling in AI stocks, but that greater political clarity afterward could help the sector establish a bottom. With data centers becoming a political issue, the completion of elections is likely to ease pressure on AI companies.
The coming days will provide some of the evidence Cramer seeks, as major tech companies report results and investors assess whether the recovery in AI stocks can extend beyond a short-term bounce.
This article is for informational purposes only and does not constitute financial advice.
