Key Takeaways:
Jim Cramer told investors using borrowed money to buy data center stocks to sell them immediately.
Jim Cramer warned that the artificial intelligence trade has become too fragile for borrowed money, telling investors to exit leveraged data center positions before the July 28 market open.
"If you're borrowing money to buy something related to the data center, then tomorrow morning, 9:30 a.m., sell it no matter what," the CNBC "Mad Money" host said. "You won't regret it."
The warning comes as the VanEck Semiconductor ETF fell 4.06% on July 27, extending its one-month decline to 9.33%. Nvidia Corp. dropped 4.92%, Advanced Micro Devices Inc. slid 8.31%, and Intel Corp. lost 3.54%. All three stocks entered the session with substantial year-to-date gains — AMD up 143.72%, Intel up 150.19%, and Nvidia up 11.04% — that have loaded leveraged accounts with profits vulnerable to margin calls.
Cramer drew a direct parallel to the dot-com era, when telecom equipment makers financed customer purchases that later unraveled. The circularity in AI financing — Nvidia has invested $30 billion in OpenAI and $10 billion in Anthropic, both major chip buyers — mirrors that dynamic, he said. OpenAI is reportedly discussing a $250 billion backstop from Nvidia for a 10-gigawatt Ohio data center campus, a scale of financial entanglement that Cramer called reminiscent of 2000.
The CNBC host stressed that he still views Nvidia as an exceptionally strong company and is not predicting a full-blown crash. Rather, he said history shows investors can quickly lose confidence when suppliers become too reliant on customers whose spending depends on continued access to capital. Margin debt has increased sharply over the past year, raising the risk of forced liquidations.
"If you're on margin, get off it," Cramer said. "I no longer feel that you'll get out alive."
Nvidia's Financial Entanglement
Nvidia's Q1 FY2027 revenue reached $81.61 billion, up 85.2% year over year, with data center revenue of $75.25 billion accounting for 92% of total sales. The company authorized an additional $80 billion buyback and guided Q2 to roughly $91 billion. Yet those strong fundamentals do not insulate the broader ecosystem from a leverage-driven unwind, Cramer argued.
The chipmaker has backed multiple neocloud providers that rent Nvidia-powered computing capacity to customers, creating a web of financial relationships where Nvidia serves as both supplier and financier. "What we learned in 2000 is that you don't lend to companies who buy your goods," Cramer said.
Where to Rotate
Rather than concentrate portfolios in data center plays, Cramer pointed to building materials supplier CRH Plc as an alternative. While CRH supplies materials used in data center construction, most of its business comes from roads, bridges, and office complexes — providing diversified exposure without the single-thread risk.
"We want tech, but not the kind of big tech investors used to buy," Cramer said. "We want materials tech and we want science tech."
For investors who own quality technology stocks outright without leverage, Cramer said the pain may be survivable. "Now, if you own terrific tech stocks, and you're not on margin, you could be fine, assuming you can handle some pain," he said.
The forced selling can extend further than fundamentals justify, but it also tends to end abruptly. Investors watching Nvidia's next earnings report and AMD's MI450 ramp have a fundamental backdrop that has not deteriorated. What has changed is the leverage in the system — and that, Cramer said, is what demands respect today.
This article is for informational purposes only and does not constitute investment advice.
