Key Points:
- CNBC host Jim Cramer advised investors to wait for a price drop before buying shares of AI chipmaker Cerebras Systems.
- The company hit the market with the largest initial public offering of the year, pushing its total value to $95 billion on Thursday.
- Cerebras boasts powerful technology and massive partnerships, including a $20 billion computing deal with artificial intelligence leader OpenAI.
- The stock currently trades at a massive 187 times its previous year’s sales, making it much more expensive than rivals like Nvidia and AMD.
CNBC television host Jim Cramer just issued a strong warning to excited stock market investors. He told his viewers to stop chasing shares of Cerebras Systems following its wildly successful market debut on Thursday. The popular financial commentator made his stance clear during his latest television broadcast. He admitted the company looks impressive, but said he absolutely cannot justify buying the stock at its current sky-high price. Cramer advised everyone to keep their money on the sidelines and simply hope for a massive price drop in the near future.
The artificial intelligence chipmaker pulled off the largest initial public offering of the entire year. Demand for the stock reached a fever pitch before trading even began. Cerebras originally planned to sell shares at $150-$160, but eager buyers pushed the final starting price up to $185 on Wednesday night. When the stock market opened on Thursday morning, retail and institutional traders rushed in. The stock price immediately jumped to $350 and eventually touched a peak of $386 during the afternoon trading session.
By the time the closing bell rang, shares of Cerebras settled at $311 each. This massive first-day rally pushed the company’s total market value to roughly $95 billion. Hitting a valuation near the $100 billion mark on the first day of trading rarely happens, and it shows exactly how much Wall Street loves anything related to artificial intelligence right now. However, this explosive growth perfectly explains why Cramer feels so nervous about the current share price.
Cramer did admit that the incredible excitement surrounding the business makes total sense. Founded back in 2015, Cerebras completely changed how engineers build computer processors. The company created what it proudly calls the largest commercial chip in the history of the computer industry. Instead of cutting a traditional silicon wafer into hundreds of tiny chips, Cerebras uses the entire wafer to build one massive processor. Engineers designed this giant chip specifically to handle the heavy workloads required by artificial intelligence software.
The company made some incredibly bold claims in its official financial documents leading up to the public offering. Cerebras told potential investors that its giant processors can run up to 15 times faster than traditional graphics processing units for certain tasks. The business also stated its hardware works more than 10 times faster when training complex artificial intelligence models. If these numbers hold up in real-world scenarios, the company could seriously challenge the biggest names in the semiconductor industry.
Beyond the chips’ raw speed, Cramer pointed to several major business partnerships that prove Cerebras is a serious player. Earlier this year, the chipmaker signed a jaw-dropping $20 billion agreement with OpenAI. Under this multiyear contract, Cerebras will provide 750 megawatts of computing capacity to the creators of ChatGPT. Amazon Web Services also jumped on board recently. The tech giant agreed to install Cerebras chips inside its massive data centers right alongside its own custom processors.
Both OpenAI and Amazon believe in the company so much that they hold special stock warrants. These financial agreements give both tech giants the right to purchase Cerebras shares in the future. Having the backing of two massive technology leaders gives everyday investors a lot of confidence. Cramer noted the company also backs up this hype with strong revenue growth. Last year, Cerebras generated a solid $510 million in total sales. This number represents a 76% increase from the previous year, following even larger jumps, with sales tripling in both 2023 and 2024.
Even though Cerebras loses money right now, Cramer said the lack of immediate profit does not worry him at all. Fast-growing technology startups often burn through cash to capture market share. More importantly, the chipmaker operates without carrying any serious debt on its balance sheet. A clean financial statement gives the executive team the freedom to invest in research and development without worrying about crushing interest payments.
Despite all these wonderful positive traits, Cramer begged his viewers to look at the massive risks. He argued that the company’s current valuation simply defies all logical financial models. When you compare Cerebras’ total value to its actual revenue, the math looks terrifying. At Thursday’s prices, the stock trades at roughly 187 times last year’s sales. This ratio helps investors understand exactly how much they pay for every $1 of revenue a company makes.
Paying 187 times sales becomes even crazier when you look at the other major players in the artificial intelligence boom. For example, Nvidia currently dominates the AI chip market, yet its stock trades at just 26 times its sales. AMD trades at an even lower 21 times sales, while Broadcom sits at roughly 33 times sales. This means anyone buying Cerebras today pays a massive premium compared to buying established, highly profitable semiconductor giants.
Cramer summarized his entire argument with a harsh reality check. He explained that buying the stock right now means you’re betting the company will deliver explosive, flawless growth for many years to come. You essentially expect the chipmaker to multiply its revenue severalfold in a very short window. While the impressive technology makes this growth possible, Cramer views the current price tag as a massive leap of faith. Smart investors will simply wait on the sidelines and look for a safer entry point.
