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Fidelity Representative (0:00)
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Homes.com Representative (1:01)
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Jim Cramer (2:12)
Hey, I'm Kramer. Welcome to Mad Money. Welcome to Cramerica. Other People wanted friends I'm just trying to make you a little bit of money. My job is not just to entertain, but to educate, to teach. So call me at 1-900-743, CNBC or tweet. MeyimKramer look out. The year of magical investing may be drawing to a close. All of this year, pretty much anybody who bought stocks connected to AI in the data center. Well, you know you made money, you really need to think about it. But now looking at the market with Dow surging 559 points, S&P advancing 0.21% and the Nasdaq dipping 0.25%. It seems like the easy money may have been made. Maybe the magic starting to fade away. It's not. 1999 goes to 2000 where there was only one unlikely winner out of the 350.coms Amazon. Google wasn't even public yet. It's just that things have gotten out of hand for the moment and we have to accept that you could be missing out on some terrific ideas away from the AI data center space. When's that happened? How telling is it? The Dow Jones Industrial average could skyrocket like this and you didn't make much money at all if you were in the AI ghetto or the formerly red hot speculative stock stocks. It's a new pattern. It's a new pattern worth heating. What happened? What's making me rethink the greatest story of the past three years? Well, there are three separate events, three separate incidents that have me quite concerned that the data center winners will grow more narrow. But that unlike 2000 when there was only one winner, we could have a half dozen winners, maybe a few more. Which still means there'll be a ton of underperformers among the previous AI ones that we all wanted to be in so badly. Think like shot, get shot first. We had some tremendous Companies with visionary CEOs and tremendous balance sheets that see this incredible potential of artificial intelligence. Amazon saw it as a Google Microsoft. We know that Elon Musk was early in he took a part in a whole host of angles including robots, self driving cars matter saw how social media franchise could be TurboTS Nvidia powered the entire movement. But there was one other company that led the way, a private one, Open air with the one pioneer chatbot ChatGPT that's got more than 800 million weekly average users. Now that is a tremendous amount of interest and a natural customer base that's apparently given the company a $20 billion run rate. $20 billion run rate, that's a lot. Sam Altman, co founder and CEO hasn't been content to just go at warp speed to create a supernova AI play. He wants to go even faster than that to the point where OpenAI might need to borrow hundreds of billions of dollars to fulfill its commitments. Okay, that's landmine number one until now. This data center build out was done with cash, not debt. So as was funded by cash. There's not that much to worry about even if the whole industry falls apart. But once you see tons of debt getting involved, debt financing, that's a different story. Everything's more risky, everyone's more vulnerable. That's just etched in stone that, that's like that. On September 9, we found out how big OpenAI's ambitions might be when Oracle announced that the remaining performance performance obligations, obligations of $455 billion. Amazon and Google were mentioned as clients. But the biggest one, not singled out by name, was rumored to be open air with $300 billion commitment. And given that Oracle put that $300 billion in its RPO, you know, it's ironclad. The problem is open. I just doesn't have that kind of money. Which means it has to find a way to give it to someone, give it to Oracle, because Circle is ironclad. They'll either borrow massive amounts of money or try to come public and sell a ton of stock. That's certainly a possibility and it could allow the year of magical investing to continue. But I bet they do the former, not the latter. Which brings me to landmine number two. There are so many companies involved in working with OpenAI that it may turn out to be a huge fiasco if something goes wrong with all that money they need to borrow. Like the dot com revolution or the rail revolution. 1800s railroads changed the world. Absolutely. But I got to tell you something, they borrowed certain amount of money and most of them went for old. I'm not saying that will happen to AI, but I wish these guys would just slow down. What is the quarter we just got from Core Weave? That's a key data center operator that had to cut its full year outlook today because it is contracted with an outfit called Core Scientific that failed to deliver its part of several data centers on time. It's a huge piece of business that didn't get done. The misquoter shocked people and it was a wake up call that you can't build these data centers overnight. There could be even more cost than we thought. Finally, there's landmine number three. And it's the biggest conversation that Sarah Fryer, the CFO of OpenAI had at the Wall Street Journal Tech Live conference six days ago where she floated the idea of a government backstop for all these companies building data center capacity. She was talking about federal loan guarantees. Kind of made it sound like they're, they could be in the works. Well, that freaked everybody out because first, Sarah Friar is a hitter with heavy Wall street and Silicon Valley credentials. Second, the forum could have been more high profile and obviously public. Third, she was given a chance to take the statement back almost immediately, but she Doubled down. Suddenly, instead of OpenAI being the invincible godfather of AI, it joined the ranks of Humpty Dumpty. She did try to correct her musings not long after saying that she muddled things. But Sarah Fryer is the real deal. She's a serious individual doing serious things. She didn't say anything off the cuff, and she's a total pro who perhaps should have known better. Now, as long as Humpty Dumpty sits on the wall, we don't got to worry about the possible need for a government backstop. We don't have to fret about President Trump and his minions trying to put Open Eye back together again. But I don't like the things that are happening in this industry now, and I certainly don't want Open Air on the wall. I say own in video, don't trade it. But we just learned that SoftBank, an outfit so rich I thought it could be meaningful to the buildup, had to sell its entire Nvidia stake at Big Point. But it was big profit to perhaps use that money for more investment. However, if you really believe the buildup will continue, then there could be no better investment than in video, which makes the chips that power all the stuff. Therefore the softbank sale worries me because maybe they need to make big may they made big commitments. They build out commitments that are too expensive and now require them to ring the register on Nvidia to cover the cost. Is that good money after bad? So many stocks with so many sectors are involved in this build out and and so many speculative stocks are connected to it, whether they be part of the huge power build out or part of the data center and its inners, or part of the quantum computing to accelerate data even faster, or nuclear, what would set things right? First, if OpenAI takes advantage of the bountiful IPO market and raises hundreds of billions of dollars to unbody the waters. Second, if things just slow. So we know we see some problems, that we see profits from the miners, not just from those who made the Nvidia picks or the AMD shovels. AMD had a great analyst meeting today. And third, that we see the end to the silliness, the ever rising stocks of companies that literally have no hope of ever making money, but have share prices that indicate they're on the verge of doing so. Am I declaring an end to the era of magical investing? How about this? I'm proclaiming that for the rest of the year it's the era of investing. Not as if by magic, but as if by profits and for that to happen, there's going to be far fewer winners and a lot more losers. Bottom line, in this kind of environment, you need to start diversifying into other growth areas. Perhaps in time to keep all the king's horses and all the king's men sidelined. Maybe OpenAI can come public and Humpty Dumpty won't have a great fall. But in the meantime, it's something you need to keep an eye on. I know I am. And the I. Let's just say it's growing jaundiced. Let's go to Buddy in Rhode Island. Buddy.