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Bank of America (0:01)
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Jim Cramer (1:56)
Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer America. Other people make friends. Hey look, I'm just trying to make you a little money. My job not just to entertain but to educate, to teach you. So call me at 1-800-743- CNBC. Tweet me at Jim Cramer. Maybe it was all a dream or more pointedly a nightmare. I'm talking about the Chinese artificial intelligence breakthrough known as Deep Seat. Remember that which caused Wall street to turn its back on the AI Data center cohort? Earlier this year we were told that the Chinese had come up the way to build AI models using far less hardware, meaning chips from Nvidia. And it crushed every stock in the group. The house of the biggest casualties being the stocks of all the companies needed to create high speed computing and generative artificial intelligence. Today. Today the Deep Seat nightmare officially came to a close as datacenter tech led the way back up driving the averages to near their all time highs. Dow jumping 4, 507 points. S&P climbing 1.1%. Nasdaq poll voting 1.43% House of pleasure almost back to where it was for everything started getting kerflowing. This rally is a total refutation of everything you heard back in January when we accepted China had beaten us in AI. It was almost replay of the Sputnik affair when the Soviets launched the first satellite to orbit orbit the Earth on October 4th of 1957. Back then we had an infuriating complex about the Soviet Union like we have now about China. We decided we were finished. We'd never catch up to them in the space race. But not only did we catch them, we leapfrogged them and we never looked back. When the Deep Seat news broke, Wall street exhibited the same inferiority complex and everything AI related got hacker. Everyone just accepted that China come up with something revolutionary that made all of our artificial intelligence efforts pointless. They know nothing. Almost no one dug into Deep Sea's highly misleading numbers. But just like with the Russians in 1957, it was all chimerical. We never heard from the Chinese again, did we? Except that they were willing to go to the mat to get their hands on Nvidia second rate semiconductors. Not even the best of. We were never going to give them that. It didn't work. Our governments came to some sort of agreement, but we didn't give them the chips they wanted. Chips they wouldn't have been going begging for if Deep seeks. But Nick had been a real breakthrough. Why didn't any of the naysayers and pessimists put that two and two together? If they had, they would have stayed in these stocks as we did. For my child. Trust. This data center renaissance. So shocking to the people who abandoned these stocks. The Nvidia, the mds, the Vertifs, the Microns, the marvel technologies are all back or nearly back in the story that envy that Nvidia CEO Jensen Huang calls the new Industrial Revolution is once again front and center. It's like Deep Seat never happened. The stocks, they're all breaking out. Of course, success has many fathers. And this rally is about more than just the data center. Just a week ago, we were trembling about what would happen in the Middle east as we watch oil prices climb and climb. The decline in oil earlier this year had been our hope to offset the rising price of tariff goods. But suddenly was going away because of the war between Israel and Iran. Stocks, which had tried to climb back once again seemed ready to roll over. It felt like only oil stocks were worth. For all its prowess, Israel seemed able to stop Iran's nuclear program on its own. But then this weekend, President Trump bombed Iran's three Big nuclear enrichment sites. And suddenly Iran no longer had a viable path to become a nuclear power. Of course, Wall street wasn't really worried about the Iranian nukes at all. It was worried about the price of crude. Usual pessimists assumed that Iran would shut down the Straits of Hormuz, blocking all 20% of the world's oil supply. But that would have represented a major escalation and without a functional nuclear program, they just didn't have the cards. In fact, Iran's desperate for money, which means they need to keep the straits open, not closed, to sell their own oil. 1.7 million barrels a day. Once the blockade thesis got taken off the table, oil plummeted from $78 and change at its highs yesterday to the mid-60s today. It's given up all of its gains since the mini war began. And I think by the way, that oil has got a lot more downside with crude going in the right direction. We're back in the declining inflation story. It wasn't enough to get Fed chief Jay Powell on board with rate cuts today. He just told Congress that he wants to wait and see. But there is enough slowness in the economy in housing and autos that I think will definitely get rate cuts at some point this year, tariff or not. That's the other leg of this rally that's driving up so many stocks. But now I got to go back to this thing that I know you care about so much. This tech situation, this Deep Seek affair is one of the most instructive stories I've come across in years of trading. It's a microcosm of everything that causes people to get the market wrong, to lose money, to write off stocks and bizarre embrace of American mediocrity in a market with the memory of a mayfly. It may be impossible to remember, but Deep seats ability to do so much more with less went almost unquestioned because it was China. And if Deep Seek numbers were real, which I don't think they were, then all the hyperscalers, the Microsoft, the Googles, the Amazons, the Orals, were wasting billions upon billions of dollars on unnecessary AI hardware. If you believe Deep Seek, it meant that virtually every tech executive was an idio. Our tech titans, we were told, had lost their minds. All that build out simply could not be justified. We have visions of tens of billions of dollars worth of write downs. So you had to sell every one of these tech stocks, everyone. And that's exactly what happened for months on end. I told you it was a mistake. And a handful of Experts called out deep seats numbers, but for the most part, nobody listened except CNBC investing club members. And we will convene tomorrow noon to talk about it. These companies became the punchline of endless jokes about overvaluation, with the biggest joke of all being in video. You couldn't go a day, make that an hour, without hearing about all the brilliant hedge funds that sold in video, could you? The company which had been leading a new industrial revolution, suddenly became a one trick pony. A semiconductor maker that needed China to make its numbers, but it wasn't going to be able to allow to sell it. So what do you do? You had to sell. Those of us who champion the data center in general and video specifically look washed up, clinging to a thesis that have been defrocked by the Chinese. We tried to argue that perhaps the whole thing was highly misleading. But Deepseek never actually disclosed their full costs, including their hardware costs. Yeah, they didn't even tell you what they spent on chips and servers. Yet somehow their numbers were treated as gospel. And anyone who questioned them, they were regarded as insane. Now, looking back, with so much of tech bordering on new highs, it's clear that these stocks never should have been sold in the first place because Deep Seek simply wasn't that meaningful. With the data center story back on, all those analysts and hedge fund managers, newsletter writers have to try to get back into these stocks. The ones they dumped at much lower levels, they might be able to get back in. If we have a tariff fiasco. Maybe they can have an earned earnings report or two. But I think they'll be left behind. A bottom line here. The Deep Seq affair made so many money, managers believe that Mark Zuckerberg from Metta, Andy Jassy from Amazon, Larry Ellison from Oracle, Satya Nadella from Microsoft, Sundar Pincha from Alphabet. We're all a bunch of morons. Here's what I have to say. Who looks like morons now? Jerry, Missouri. Jerry.