Cramer explains why investors are no longer paying up for AI stocks

CNBC’s Jim Cramer on Tuesday suggested that despite the fervor for artificial intelligence, investors are no longer willing to pay high prices for stocks related to the technology because of a pervasive uncertain macroeconomic environment.

Why is this happening to us? Why do our stocks go down when nothing’s happened to the companies underneath?” he asked. “Look, when everyone’s terrified that a piano’s about to fall on their heads, they don’t want to get hit by the baby grand — and right now they don’t want to own the falling stocks either.”

Cramer cited “multiple compression,” a term that refers to a stock’s price decline when nothing in the company’s fundamentals seems to have changed, and he applied the notion to current market action. Wall Street is concerned about the impact of President Donald Trump‘s fluctuating tariff policies and his statement that the economy is in a period of transition. After two consecutive winning sessions, stocks plunged back into a sell-off Tuesday, as the Dow Jones Industrial Average shed 0.62%, the S&P 500 lost 1.07% and the Nasdaq Composite declined 1.71%.

Investors’ macro fears overrode developments from Nvidia‘s annual GTC conference, Cramer suggested, where innovations in AI from top companies are on display. Nvidia CEO Jensen Huang showcased the industry leader’s new line of chips and teased developments in the broader AI space. Yet, the stock finished the session down more than 3%.

While Nvidia’s announcements “might mean everything for the future,” Cramer said “they meant nothing for today.” He said tech stocks — especially those related to AI — are vulnerable to multiple compression in this environment because they are expensive. He added that adjacent sectors like enterprise software and biotech are also liable to see losses.

“This latest round of multiple compression came on a day of wonderment about artificial intelligence, and even with Jensen’s fabulous speech, multiple compression was just much more powerful,” he said. “It’s going to stay that way until we get through this environment, either because the White House backs off, or because stocks come down to the point where we simply get used to it.”

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Nvidia.

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  • Aniket Pujari

    Aniket Pujari

    Aniket Pujari, a graduate in Financial Markets, is the founder of Minute To Know News, a digital platform providing daily news updates on cryptocurrencies, finance, and economics. With a passion for finance and technology, Aniket has been exploring the world of cryptocurrencies since 2015, building a deep understanding of these rapidly evolving industries.

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