CNBC host says investors are rotating out of volatile AI infrastructure and chip names into defensive stocks, making leveraged data center positions especially risky as spending and capex concerns grow.
CNBC's Jim Cramer said the AI trade has become increasingly fragile and urged investors using margin trading to exit data center-related positions immediately. He said investors are rotating out of many of this year’s biggest AI winners and into more defensive names such as Coca-Cola, PepsiCo and Walmart as questions grow about whether the recent pace of AI infrastructure and data center spending can continue. Cramer pointed to Alphabet’s nearly 7% drop after it raised its 2026 capital spending guidance to $195 billion-$205 billion from $180 billion-$190 billion, pushing quarterly free cash flow negative, and to sharp reversals in memory chip stocks including SK Hynix, Micron, Western Digital and SanDisk after an AI-driven rally. He warned that rising margin debt and bigger swings in the sector make leveraged bets especially dangerous because margin calls can force selling into declines. While he said the rotation resembles parts of the 2000 dot-com unwind, he stopped short of predicting a crash and said he remains bullish on Nvidia and Intel. He added that investors should favor companies with broader growth drivers, citing CRH as a way to benefit from data center construction without concentrating solely on the theme.