Cramer: AI's Circular Financing Looks Like the Dot-Com Bubble

Jim Cramer is sounding the alarm on how the AI boom is being funded, and his reference point is not flattering. On CNBC, the Mad Money host said the current wave of AI vendor financing looks a lot like the arrangements that blew up the telecom equipment sector in 2000.

“I lived through 2000,” the “Mad Money” host said. “I don’t want the sequel.”

What set Cramer off

On Sunday, the Wall Street Journal reported that Nvidia was discussing a $250 billion backstop for OpenAI that would help finance a planned 10-gigawatt artificial intelligence data center campus in Ohio. CNBC confirmed the report on Monday, and Nvidia declined to comment. The proposed guarantee would support the project’s lease and construction debt, not the Nvidia chips deployed inside the facility.

Shares of Nvidia fell more than 4% on Monday, pulling many semiconductor stocks down with it.

The circular financing problem

The discussions are the latest example of the increasingly circular nature of AI financing. Nvidia has invested in several companies that are also major customers for its chips, including a $30 billion investment in OpenAI in March and a $10 billion investment in Anthropic.

Cramer said the circularity of the arrangement reminded him of the late 1990s, when telecom equipment makers helped customers finance major purchases to fuel growth. His core lesson from 2000: “What we learned in 2000 is that you don’t lend to customers who buy your goods. They might default and your earnings get smashed.”

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Why the risk extends past Nvidia

Cramer said the risks extend well beyond Nvidia because a growing number of companies now depend on continued investment in AI infrastructure. “There are so many companies counting on the data center for their earnings,” he said. “If the market decides it doesn’t want to fund any more data centers, and the companies themselves don’t have the money, or they don’t get paid, then we’re back in 2000.”

Nvidia posted $81.6 billion in Q1 revenue, up 85%, but carries $119 billion in supply commitments that anchor Cramer’s counterparty default concerns. OpenAI is not investment grade and is known to be burning significant cash.

Not just Cramer

JP Morgan strategist Michael Lewis calls the current AI cycle ‘too close for comfort’ to dot-com, with 34% of the S&P concentrated in just 10 stocks. That concentration is what makes any wobble in AI capex a market-wide event, not a single-name story.

While Cramer said Nvidia has the financial resources to support projects of this scale, he argued that strong balance sheets alone have not always been enough to shield companies from the fallout when customers become overextended. “Nvidia shouldn’t make these guarantees even if it has all the money in the world.”

Options market and stocks to watch

NVDA: Watch for continued pressure and elevated put activity as traders price in counterparty risk on the OpenAI backstop.

AMD and AVGO: Watch for sympathy moves in semis if the circular-financing narrative sticks.

MSFT: Watch for reaction tied to its OpenAI exposure and Azure AI capex commentary.

ORCL: Watch data center backlog names, since Oracle’s recent rally is tied to the same AI infrastructure spend Cramer is questioning.

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