Jim Cramer highlighted the increasing fragility of the AI trade, particularly in the context of data center stocks, which have seen significant price increases over the past year but are now experiencing a pullback due to concerns about the sustainability of data center spending.
He cautioned that the rising levels of margin debt make investing with borrowed money particularly risky, advising investors to sell any data center-related stocks they hold on margin. Cramer emphasized the dangers of margin trading, where losses can be amplified and lead to margin calls, forcing investors to sell at unfavorable prices.
Instead of concentrating investments in data center stocks, he recommended looking for companies with diversified growth sources, citing CRH, a building materials supplier, as an example. Cramer noted that while owning quality tech stocks outright may still be viable, investors should be prepared for volatility