Jim Cramer Warns Investors Against Trading AI Stocks With Borrowed Money

CNBC's "Mad Money" host Jim Cramer has cautioned investors against trading AI-related stocks while using borrowed money.

According to Cramer, the AI trade has become increasingly fragile, making it a dangerous arena for those using leverage. He recommended selling any data center-related stocks purchased with borrowed funds immediately. "If you're borrowing money to buy something related to the data center, then tomorrow morning, 9:30 a.m., sell it no matter what," Cramer stated, adding, "You won't regret it."

Stocks in many companies providing AI infrastructure and data centers have surged significantly over the past year. However, the sector has recently begun to pull back as investors question the sustainability of data center spending rates. Cramer believes the resulting volatility in AI stocks makes trading with borrowed money, known as margin trading, particularly risky.

Cramer urges investors to get off margin entirely. He suggested looking for companies with more diversified sources of growth instead of concentrating solely on data center plays. As an example, he cited building materials supplier CRH, which supplies materials for data center construction but also derives significant revenue from roads, bridges, and office complexes.

Cramer did note, however, that investors who own quality technology stocks outright, without being on margin, may still be able to weather the volatility, provided they can tolerate potential losses.