Jim Cramer warns AI’s circular financing frenzy echoes the dot-com bubble

CNBC’s Jim Cramer on Monday said the latest chapter of the artificial intelligence boom is reviving memories of the excesses that fueled the dot-com bubble.

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

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 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 last year. The chipmaker has also backed multiple neocloud providers that rent Nvidia-powered computing capacity to customers. Nvidia has said those investments support the growth of the AI ecosystem while offering attractive long-term returns.

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. While those deals initially boosted sales, he recalled that many unraveled when cash-strapped buyers could no longer pay, inflicting heavy losses on suppliers and investors alike.

“What we learned in 2000 is that you don’t lend to companies who buy your goods,” Cramer said.

Cramer stressed that he still views Nvidia as an exceptionally strong company and is not predicting a repeat of the dot-com crash. Rather, he said history shows investors can quickly lose confidence when suppliers become too reliant on customers whose massive spending depends on continued access to capital.

“If the buyer, in this case, OpenAI, can actually afford to pay for these chips, perhaps because it comes public … then Nvidia’s in terrific shape,” Cramer said. “If the buyer can’t pay, well, that’s a different story.”

OpenAI confidentially filed for an initial public offering in June, but has not announced a timeline for its debut. The company was valued at more than $800 billion by private investors in March as it races to expand the computing infrastructure needed to power its artificial intelligence models while competing with rivals including Alphabet and Meta.

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.”

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. Just history, that’s all, just history,” he said.