CNBC's Jim Cramer said Tuesday that investors should not abandon semiconductor stocks despite the recent selloff, arguing that strong chip demand supports long-term growth. The VanEck Semiconductor ETF has fallen 7.2% over six consecutive sessions. Cramer warned that rising oil prices and interest rates could prolong the selloff. However, Cramer argued that chip stocks increasingly trade together regardless of individual fundamentals, obscuring the strong demand that fueled the sector's rally earlier this year.
Cramer described a recent visit to an Apple showroom, where Cramer saw devices featuring a more personalized Siri and advanced smart home technology. Increasingly sophisticated consumer products require more computing power and memory, creating additional opportunities for chipmakers. Cramer urged investors to examine the devices that use chips rather than focus on the semiconductor index. Cramer said chips appear in unexpected places.
Cramer pointed to memory chipmaker Micron as a company whose fundamentals are being overshadowed by the broader selloff. Micron has become one of the biggest beneficiaries of the artificial intelligence build-out, with demand for memory chips far exceeding supply. Cramer highlighted Micron's 26 long-term customer agreements, which currently cover about 35% of revenue through 2030. Negotiations are already underway for 2031. Cramer said the take-or-pay contracts require customers to honor financial commitments, giving Micron greater visibility into future revenue. Cramer said the absence of such agreements would worry Cramer.
Cramer also highlighted expanding uses for CPUs from Intel and AMD. Cramer said those CPUs are basic building blocks for practically every machine. Cramer acknowledged that semiconductor stocks could suffer further losses after substantial gains. Cramer said a sharp pullback was reasonable after the rally, but investors should not dismiss the fundamental demand behind those gains. Cramer argued that devices and rapidly expanding uses explain why Micron, Intel and AMD shares have risen.
Cramer said the rally was not entirely attributable to Situational Awareness. Cramer accused the hedge fund of using borrowed money to drive many semiconductor stocks to unsustainable levels. Cramer said much of the rally reflected underlying demand.
Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, owns shares of AAPL, INTC and MU.
Jim Cramer Defends Semiconductor Stocks Amid Selloff, Cites Strong Demand
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Summary
Jim Cramer told investors to stay with semiconductor stocks despite the recent selloff, pointing to strong chip demand and long-term growth. He cited Micron’s customer contracts and Intel and AMD’s expanding CPU use as key strengths. Rising interest rates could extend the downturn, but Cramer said fundamentals remain solid. The fear and greed index shows mixed sentiment, but he argues the sector is still a long-term play.
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