Mad Money w/ Jim Cramer 10/9/26

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1:17Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. Are you going to make friends? Hey, man, I'm just trying to make a little bit of money here. My job is not just to entertain you, but to do some teaching. So call me at 1-800-743-CBC. Tweet me, Jim Kramer. No more guesswork. We're about to go into the wide world of earnings season. So we don't need to hang on every little data point to figure out where to put the money in the market. Oh, we had a nice rebound today. Dow gaining 423 points. That's been advancing 0.59%. Nasdaq climbing 0.64%. Would have liked that to be a little bit higher.

1:52We reassessed how well tech companies are really doing after a jarring day of mistaken assumptions about an artificial intelligence slowdown. More on that later. I think we need to rebel against the persistent idea that somehow all these trillions of dollars in AI infrastructure spending will prove to be the biggest fool's game of the century. When the greatest investors of our time, you can't think about people like Mark Zuckerberg, Elon Musk, Satya Nadella, Microsoft, all decide that they need to spend big money to meet the demands for AI. I tire of these Wall Street pundits, hedge fund managers who tell us, hey, the trade is over.

2:29Not according to the largest companies on earth. We're going to explore that tonight, too, and not in a happy way. But the correction to the correction is now behind us. So let's go to next week's game plan in a kind of a truncated week. All right. And Monday's very quiet. No serious earnings or numbers. Tuesday, here it goes, platform bank earnings. Now, these stocks have been coming in way too hot in previous quarters, but the banks have been some of the worst performers of late. So I think they're priced for disappointment. You know what? If they don't actually disappoint, we might actually catch a rally.

3:05Which ones am I thinking about? Well, first is Goldman Sachs. That was my name for Goldman Sachs, which we own for the Chapel Trust and I worked at. We're telling club members that there's more to Goldman than just IPOs and M &A, of which, frankly, has been very little. There's bond issuance and trading in an environment where the volatility has been so incredible, something is usually good for Goldman's bottom line. And Goldman Sachs has dropped from$1 ,153 to$895. Can it really be that bad? Wells Fargo's been clubbed of late, yet I believe that this stock, another CNBC investing club name, is truly ready to roll.

3:42The stock sells it just over 10 times next year's earnings estimates. Make it one of the cheapest stocks. I think it's going to give you both growth and better net interest margin. I think Charlie Sharp, the CEO, is fired up to deliver. I think it's right here. On the other hand, JP Morgan reports, too, now this bank consistently does well, but its stock is priced for that. It's priced for consistency. And that makes it a little bit dicier than the other, especially when it's brilliant CEO Jamie Dimon does have a tendency to say things that sound borderline apocalyptic on a conference call. I fear he'll go there if he asks about AI.

4:16I just want to know how the business is doing. I'm old fashioned, but not not a slew of downbeat warnings, please, about a future that he claims will also be very right, very bright at the same time. I don't know. Can you be I hope he doesn't put the odds of all of us dying in 2030 and May only like five percent. that would all be a bummer, too. Next, I've been telling you about the Citigroup is the one to own for any season. I've been doing that for a long, long time. And then the last time I got it wrong. So now I've got to see if they regroup. CEO Jane Frazier done a remarkable job. She's incredible.

4:47Turning around the city last quarter, just OK. It's not all banks. We also get the results from UnitedHealth Group. I think that company's ready to return to its own beat and raise greatness. It comes out at 6 o 'clock. It's like, I think they write the headlines before it comes out. Beat and raise, and then it comes out. The one I want to address, though, and I think it's a little tricky, but we're going to go there because I want to make you some money. It's Johnson & Johnson. I am willing to say that J &J is a top 20 company in this country, but its stock is a terrible trader. Now, what do I mean by that?

5:14I'm not talking about absolute performance. The stock's up 26 % for the year. When I say J &J is a terrible trader, I'm talking about how it reacts to earnings. As soon as the release comes out, the stock tends to jump up, and then it starts a sickening slide down, In a real pirouette, it seems to last in the early part of the conference call. Usually in the middle of the call, by then, we begin to realize something special is going on. Things are better than expected, and then people start buying the stock back. But not before a lot of money is lost. It is agonizing. With 18 potential blockbuster drugs in the pipeline among the best cardio and oncology franchises, J &J needs to be bought when the stock gets crushed.

5:50You need to be nimble. It's almost always that way. It's going to be that way probably again. Now, if you buy the stock in the tsunami of red ink in the wake of the published numbers, but before the call gets going, I bet you're going to get what we say is a terrific basis in J &J, your starting point. So keep that in mind. Giant position for the travel trust has been for ages. Wednesday, we're on Macro Watch. We get the consumer price index. Fed chief Warsh wants to shrink inflation. I'm with him. And believe it or not, I'm starting to see some signs that he's getting it under control, excluding oil.

6:23Will the CPI provide any relief? It may be too early for a single 25 basis points rate hike to have the kind of impact that we need as a nation. But I think it could be a nicer start than people realize. That'd be terrific. Then we have the producer price index the next day. We're watching inflation like a hawk these days. And to do that, we have to care about more than just the CPI. We need to see how embedded it is. Before we come in on Wednesday morning, there's a Dutch company called ASML. They report they make these gigantic machines. They're like the size of city buses to help manufacture semiconductors.

6:53We saw a couple of them when we were in Boise, Idaho, looking at that new foundry at Micron. If ASML raises guidance and talks about solid demand, then you need to be ready to do some buying. And the ones you want to pick up are land research and applied materials. Those are my two favorite semi-capital equipment stocks in America. Now, we've got three terrific financials reporting, BlackRock, Bank of America and Morgan Stanley. So many people think Morgan Stanley is just an investment bank. Wrong. It's also one of the biggest repositories of people's wealth. And it's been incredibly successful at corralling young people who want to invest for the longer term.

7:25Needless to say, they also have a ton of super rich clients. Bank of America is solid, and solid means a quiet increase in stock. Black Rocks is stalwart, the biggest asset gatherer in the world. It's going to be good. By the way, Thursday really is a hose of earnings, starting with Taiwan Semi. We got a pretty good snapshot of its business earlier this week. But this is the earnings number we've been waiting for. Taiwan semi-coo controlled pretty much any chip stock if it's weak. If it's strong, though, we could have a rally of immense proportions. Now, Nvidia closed really horribly today. I don't know if it can rally until we see TSMC.

7:59We also want to see if retail is slow. We're going to find out from the September retail sales numbers. The industry's been roaring of late, and all that spending could turn out to be inflationary. You notice that theme that I'm giving you? Individual investors have become a real force in this market. We really haven't seen this since the dot-com era. Now, they've moved the averages, and they're getting invested in lots of idea stocks. I love that. Who knows more about what they're buying than Charles Schwab? So we'll listen on that conference call, too. Plus, the company has an analyst being that day, meaning we'll get a real good look at the business.

8:26Not much on Friday, but remember what we're looking at here. Bottom line, we have earnings. We have to worry about oil. And we have to start accepting that we're going to have a plus 6 percent long bond. That's the 30-year Treasury because of demand for money from both the Treasury and private enterprise, chiefly data center investments. When it comes to bonds, there's too much supply and not enough demand for the moment. It's coloring everything, and we need to respect how challenging the market can be when interest rates head inexorably higher. How about we go to Mike in Minnesota? Mike. How are you doing, Jim?

9:00Mike, I'm good. How are you? I'm really good. I've been following you guys since day one. Oh, man, that's fabulous. Thank you very much. So my question is, I'm holding Intel. I'm down 7 % or 8 % based on today's close. And earnings are at the end of this month. I'm wondering, should I hold through earnings? No, you buy through earnings. The stocks come down hideously from 115 to 104. It's really a terrible trader. I know they can't do a buyback. They just did a big issue with 95, where, by the way, the CEO bought stock one. It acts terribly. I know that. But remember, it is up a lot. And it has just become a lousy trader.

9:37When things are bad, it goes down more. When things are good, it goes up more. I'm not crazy about that. But that doesn't mean I don't like the company. And that's what I care about. Oh, Skyler in California. Skyler. Booyah, Mr. Kramer. Booyah. I'm a longtime viewer, first time caller, all the way here from Sacramento. Oh, God, I lived at 10th and P. Love it. Right there where all the honeysuckle is. This really smells great in the spring. I was living in my car, though. That was the problem. All right, so what's happening? Yeah. I am calling about stock ticker ONON. It seems like it's finally getting out of the low.

10:17What do you think? Well, it did have, you know, it's kind of a relative thing. It had a better quarter than most in that industry, but I don't want to touch that industry. I don't want to touch anything leisure. I mean, like, I don't want, I think ON is bottoming, and that's terrific, and new management is doing a good job. I think you could make a couple of bucks, but it's a trade, and I'm looking for investments, and it is just a trade. And thank you for watching. It's been watched forever. I think it's fantastic. Bonds are coloring everything. We just have to accept that this is a different market when rates are this high and climbing.

10:48And then we can start thinking about the actual earnings of the companies I just showed you. On Man Money Tonight, news of OpenAI's revenue shortfall since some tech stocks really tumbling yesterday. Is it really that big a deal? Look at crunching numbers. Then earnings out of Delta are showing a bright spot in the airline industry. Don't miss my analysis of the latest quarter. And yesterday was a reminder that If you're not diversified, holy cow, you're not going to be able to stay in this market. And that's why we're playing a round of MI Diversified. Stay with Kramer. Don't miss a second of Mad Money.

11:20Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

11:41There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash mad. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that.

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12:57No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

13:14Midday yesterday, a jarring headline from the Financial Times hits the wires. OpenAI annualized revenues,$20 billion less than previously signaled. No, no, no. What a gut punch. The whole AI infrastructure complex immediately gets slammed. NVIDIA is finishing down nearly 3%. Oracle, which is practically joined at the hip with OpenAI dropped more than 5%. Smaller NewCloud names like Core, we've got hit even harder off 8%. Sell, sell, sell. The NASDAQ composite had its worst session since mid-August. The house of pain. Now, if this story is true, then that's devastating for the entire AI complex.

13:56So, is it true? Short answer. Not really. Long answer. This is a complicated story driven by obscure accounting policies that generated blitz of confused headlines. You know what we got to do? I walk you through this thing because it's really unbelievable this could happen. As best as I can tell, the confusion started all back on September 29, when a couple reports said that OpenAI's annual recurring revenue had reached nearly 70 billion dollars. Those stories initially came from Reuters and Axios, both citing inside sources. Then they were picked up by many other media outlets, not to mention a host of posters on social media.

14:35Gradually, everyone just accepted, or at least seemed to accept, that OpenAI had genuinely reached$70 billion in annual recurring revenue by the end of last month. That was the baseline assumption before yesterday, and it was a powerfully bullish one. Then the Financial Times came out and said the$70 billion figure was wrong. In fact, the real number is more like$50 billion. That sure looks like a$20 billion less than previously single miss, right? It looked to many as a major shortfall, and it crushed the entire complex. But the problem is these numbers are not apples to apples. To understand what's happening here, you need to know that OpenAI and Anthropic, the two leading AI labs, account for their revenue earned through third parties differently.

15:26Basically, when you buy access to Claude or ChatGPT, you can do it directly or you can go through the big cloud infrastructure firms, Amazon Web Services, Microsoft, Google Cloud. Of course, those firms, they take a cut. I bring this up because Anthropic includes all the revenue from that type of third party sale as its own revenue. The cut that goes to AWS or Microsoft is then recognized as an expense. But OpenAI doesn't do that. They only recognize the revenue they actually collect from these third parties, apples to oranges. So here's what seems to have happened. According to some much clearer reporting from CNBC and Bloomberg, you can get a real picture of how distorted things got.

16:11At some point in late September, OpenAI shared with someone, probably its own investors or the respective investors, that if the company reported the same way that Anthropic does, its annualized revenue would be close to$70 billion. Presumably, they were trying to give these people the apples to apples comparison to the largest competitor. Then what happened seemed to be a game of telephone. Someone who heard that from OpenAI tells it to someone else, and that person tells what they heard to a reporter from Reuters or Axios. Then that$70 billion number gets reported, and since the story came from two different news outlets, well, it's got to be fact.

16:49Then the Financial Times gets its hands on this$50 billion revenue figure this week, and they report it as a major news story. Fair enough, everyone thought the$70 billion number was real, so this makes it for a sexy negative headline. At first glance, it's a disaster for the AI complex. In reality, though, these various news outlets are actually talking about two different numbers. The$70 billion is OpenAI's gross revenue, which it doesn't use for its own financials. And the$50 billion is his debt revenue, which it does use. The business isn't doing worse than we thought. It's just an errant comparison where the Anthropic got loose and people got confused.

17:23Much selling for nothing? Look, while we're on the subject, I need to also talk about another thing that's going on. And it's been driving me crazy. Both the Reuters report and the Axis report last week said that OpenAI's annual recurring revenue had reached nearly$70 billion by late September. Putting aside whether that gross revenue or that's net revenue, it really shouldn't be called annual recurring revenue. This is a real metric that software companies use to track their subscription contracts, hence recurring. The customer is obligated to spend a certain amount of money at certain intervals for a defined period of time.

17:57While the AI Labs do have some contracts like that, they sell subscriptions to Claude and ChatGPT, they also have many customer arrangements that are basically consumption-based. The amount you pay is basically the amount you use. And you know what? That's not recurring revenue. If we get a better version of ChatGPT like OpenAI launched with Astro last month, they could snatch a bunch of enterprise customers from Claude. Anecdotally, that seems to be happening. Or those customers could just switch to cheaper open-weight models. So, again, I think it's wrong to quote these companies' overall revenue totals as annual recurring revenue.

18:32What makes this so tricky, though, is that the more accurate term is the same acronym, ARR. It's the annualized revenue run rate. But that's just the revenue total for the most recent month multiplied by 12. You can say, who cares? Well, I care. That's who. Because annual recurring revenue is more durable. It tends to get a higher price during its multiple. When you're trying to value a company, Wall Street pays less for non-recurring revenue than they do for recurring. Too episodic. It's a major difference. And it's the journalists get it wrong all the time. The same goes, by the way, for the distinction between gross revenue and net revenue.

19:07Given that these AI labs are either not very profitable or genuine money losers, they're most likely going to be valued on a price-to-sales basis. But that means you need to use the right sales numbers. You're going to end up overvaluing the company. In the end, I don't think OpenAI did anything nefarious here at all. Certain reporters eager to get some sort of scoop about the state of the business got confused about what exact metrics they were hearing and reported something that lacked crucial context. Of course, OpenAI could have saved everyone a lot of trouble and corrected the record when those reports were coming out last week.

19:39Although as a private company, they're under no obligation to disclose that to the public. But the real takeaway here is that nothing actually got worse yesterday for OpenAI or the broader AI ecosystem, even though some of these stocks did not come back at all. When I did my checking, I heard things actually for open AI were better than expected. Still, this one, this only goes to show that we really need to see the details of these AI labs financials. Because until we do know more, there's probably going to be a lot more days like yesterday when the whole cohort gets hammered on pure confusion.

20:11Now, this should happen whenever anthropic IPO prospectus is revealed to the public, which should be the next few weeks. If the company is still targeting a mid-November IPO, the sooner we get these numbers, the sooner we'll know if all this AI capital spending by the hyperscalers has been worth it. But the bottom line, in the past two days, what we've seen is that we can't wait for these leading AI labs to open the kimono and show us what they've really got, financially speaking. Because until that happens, too often we'll be trading on hearsay. And hearsay's a very quick way to lose money. Their money's back in for the break.

20:52Coming up, was Delta able to land a strong quarter? Kramer's calling up the numbers to find out next. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases.

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22:21Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

22:35The price of oil is at$91 a barrel. The Fed's hitting the brakes on the economy with rate hikes. You'd expect that to be a nightmare scenario for the airlines. For decades, these were textbook boom and bust stocks, and the busts were brutal. It's why I have stayed away from them for years. But lately, I've pointed out that the top airlines need to be transforming into something more durable, with loyal business customers who consistently pay off for the best seats at the front of the plane. That thesis is really being put to the test here, but right now, I really like what I'm seeing. This morning, Delta Airlines, one of the best, reported a small earnings miss, paired with a similarly modest revenue miss.

23:14Worse, they did slash their full-year earnings for a thing by 24%. That's big. Management now saying they could earn$5.10 to$5.60 per share, which is down from$6.50 to$7.50 range. That were the estimates. But after opening lower and trading down nearly 4 % this morning, the stock battled back all day and turned positive just before the close because Wall Street saw this coming. And Wall Street was right. At the same time, they're talking about earnings of$1.15 to$1.65 for the current quarter. The midpoint's only three cents below what the analysts were expecting. Delta's even guided for 20 percent revenue growth when Wall Street was only looking for 18 percent.

23:54Basically, they're taking a terrible beating on profitability from high fuel costs. But demand for flights remains strong. Delta paid an adjusted$3.61 per gallon of jet fuel, up 60 percent year over year. Yet adjusted pre-tax profit was roughly$1.5 billion for the quarter, up about 1 percent from last year. For the full year, they're looking at a$6 billion increase in fuel costs. But management believes they can put up a pre-tax profit of$4.5 billion. That's only down$500 million from last year. That's incredible. Delta's been able to generate enough additional revenue to offset most of the damage.

24:33All right. So, I mean, this was really kind of an impossible. How did they pull this off? Okay. The company's premium revenue grew 18 % to$6.82 billion. They're now making more money from first-class, business-class, and expanded legroom seats than they are from coach. Premium sales increased 6%, but on the conference call, we heard an especially encouraging detail. Premium load factors rose almost 2 percentage points, while fares also increased too. Delta added premium capacity, filled more of it, and charged more too. This is the best kind of demand, and it's proving to be pretty sticky. This is the long-on-money, short-on-time customer that I always talk about.

25:11After COVID, people who had been stuck at home decided they want to make up for lost time. And what do they do? They travel. They get an experience. I thought that might be temporary. Increasing, though, it looks like a lasting change. The same way that the Great Depression permanently soured my parents' generational banks. Now, this morning, Delta CEO Ed Bastian came on Squawk Box to speak with our own Phil LeBeau. He said he wasn't seeing a slowdown in bookings. of the conference call, we learned that the fourth quarter was already more than 60 percent booked with encouraging early trends for the first quarter of next year.

25:43Prices are up. It's incredible. Even if inflation is squeezing the consumer, Delta's well-heeled premium customers, they don't seem to know the difference. And look, the strength extends beyond the front of the plane. Main cabin revenue increased 12 percent, with unit revenue up 17 percent, while seats declined modestly. Of course, the company capacity was essentially flat, While revenue rose nearly 16 percent in the old days, the airlines would expand aggressively when times were good, then get pancakes slow, slow when the economy slowed down. In more recent years, they've been a lot more disciplined about adding new capacity.

26:17And now it's really paying off. It helps that there aren't a lot of planes for sale from either Airbus or Boeing. Corporate sales grew at double digit rates across every sector, led by banking, technology and energy. The week after Labor Day was Delta's strongest corporate sales week in history. That's unbelievably good. More than 90 percent of respondents to his corporate survey expect travel to increase or remain stable next year. Domestic international unit revenues also improved broadly. That's fantastic. I mean, in the Zoom economy, that wasn't supposed to happen. It's obviously happening.

26:52Then there's loyalty. This year, Delta's on track to receive more than$9 billion from American Express SkyMiles partnership. Cardholder spending grew at a double-digit clip for the eighth consecutive quarter. The rewards program is arguably the best part of the business. The company also has outsourced airline maintenance business that saw 28 % revenue this past quarter. Just through September, it's brought in about a billion dollars. Delta thinks they can more than double that business over the next several years. Basically, this airline's much less hostage to actual flights than it used to be.

27:20Oh, within the core airline business, it certainly doesn't hurt that Delta led the industry in on-time arrivals and departures this quarter. No wonder premium customers are willing to pay up. There's finally an airline that gives them decent service. Now, the fourth quarter outlook assumes jet fuel at approximately$4.25 a gallon, including a 40-cent benefit from Delta's refinery. They own a refinery. That refinery provides a very useful offset, but it's not enough, obviously, to cancel out the impact of oil at$91 a pound. So Ed Bastian painted a pretty darn bullish picture long term. Delta has been raising fares to recover those fuel costs.

27:56And so far, there's been limited resistance from their customer base. Once the war with Iran ends or at least fizzles to the point that oil can come down, this airline will be printing money. Of course, that assumes the rest of the industry stays disciplined about adding new planes and holds a lot of pricing. But I'd be willing to take that bet because there just aren't enough new planes that can be bought. and Delta is in much better shape than it used to be. The analysts are seeing the same thing. Wolf emphasized the company roughly spending earnings despite the fuel shock, suggesting that Delta's accelerating unit revenue could stand out against competitors.

28:30Jeffries liked the revenue momentum. UBS viewed the results as solid. Bernstein had more cautious about costs and the fourth quarter outlook. Goldman noted the strong revenue guidance largely matched investors' expectations. But look at this. The price targets here. You've got an$82 stop. Wolf is a$90 price target. Jeffries,$95. Bernstein,$100. UBS,$105. Goldman Sachs,$114. That's a real vote of confidence. With the numbers being missed, these are beautiful price targets. At these levels, the stock's trading just over 10 times next year's earnings estimates. Not expensive. UBS and Goldman are looking for Dell to earn more than$8 a share next year.

29:08Consensus is about$7.68. Those forecasts depend on fuel, fares, and costs. But the recovery potential is pretty meaningful. If the earnings also become more predictable, investors could eventually award Delta a higher price to earnings multiple. And that is the old. That's what I talk about how in the book, how you can get a higher P.E. And that's how a stock can go higher. All right. How about the latest broadside from Elon Musk? Let's solve this problem. When Delta picked Amazon's forthcoming satellite Internet service, Leo, for its next generation in-flight Wi-Fi rather than Starling, Musk predicted that Ed Bastian would lose his job over this.

29:48Regular viewers know I like Starlink. Maybe I love Starlink. But in his interview this morning, Bastion basically refused to engage with Musk. He stayed focused on the customers and the business, which is doing much better than it has any right to do in this environment. So let me give you the bottom line in this very encouraging, terrific story. I'm not rushing to buy an airline, OK, not into the fuel spike. But I buy the story that Ed Bastion told Phil Lebeau. Delta is putting up incredible numbers to the point where they're able to offset a huge chunk of the increase in fuel costs. Once the price of crude comes back down, I think they'll make out like bandits.

30:22There's a reason the stock will rebound it hard from its slows this morning and finish the session in positive territory. The reason is Delta is better than ever. Now we're going to go to Stafford in California. Stafford. Hey, Jim, how are you doing today? I am doing well, Stafford. How are you doing? I'm great, thanks. I want to get your thoughts on Otis Elevator. I know they have some exposure to the Chinese housing market, but I know the stock's been pretty well punished. OK, now, this is a tough one because Otis, candidly, China's not been great. They're really much more in the service revenue game.

30:58The stock has come down, down 24 % for the year. But I see no catalyst. Without a catalyst, I can't recommend a stock just because it's cheap. All right. I buy the story that Delta Zed Bastion is telling. Once fuel prices normalize, I think Delta could be in a great position. Now, much more money, including Kramer's favorite game, MI Diversified, and Wall Street financial media love to get stuck on esoteric terms. But I think it's time to retire one of them that's really getting on my nerves. You want to hear about this, I'm going to explain. And all your calls rapid fire tonight's edition of The Lightning Round.

31:32So stay with Kramer.

31:42The S &P is near record highs, but that doesn't mean you shouldn't be prepared for volatility. And this is Mark, when one article about a private company can send an entire cohort of stocks to keep them to the red, it's a reminder that you need to be diversified if you want to stay afloat and stay in the game. That's why tonight we are playing Am I Diversified? That's where you call in, you give them your top five holdings. And I tell you, if you're diversified enough, maybe you need to mix it up a little. We're going to start with Mary in Idaho. Mary, what do you got for me? Well, Jim, it's been a minute since I talked to you.

32:12Happy TGIF. Oh, my God, yes. Yeah, great day of the week. I finally gave up on Chewy, much as I hated to. I just couldn't bear to see it go down any further. I hear you. We're a user, but, you know, I mean, that's about the extent of it, isn't it? Yeah, it is. I mean, I can't envision ordering dog things from anywhere else because they are so good. True. But sometimes you just have to close your eyes and say it's going to get better. All right. So let's go over what we got. The five stocks I have are my two on it, don't trade it, Apple and NVIDIA, Marvell J.P. Morgan and Amazon Wow, okay this is a little tough for me, Mary yeah, I can't, I'm not going to try to tell you to sell one of these because I say on it, don't trade, hey we had a good trade they always said buy Apple down there like a 3.32 but here's the problem and J.P.

33:21Morgan, I think we're going to put a good quarter, not a great quarter, good quarter the stock's a little bit too high versus the others but that's okay, it's a nice steady slope Buy more JP Morgan if it gets hit. All right. Now, these are ones where Matt Murphy runs Marvell. I've known Matt for years. And we've got Andy Jassier on Amazon. These are both trading together. And the notion of being diversified is you don't want to have too many stocks trading together. We are going to have to, Matt Murphy, close your ears. We are going to have to sell Marvell. And we're going to buy some J &J next week when it reports.

33:53Okay. So we're going to sell Marvell Monday and buy some J &J. will let you keep Amazon for right now because Amazon right now is being much more of a... Look, I should tell you to sell the Amazon, too. I just don't want to do it. I don't want to sell all the stocks I really like. Mary, I'm making an exception for you. I happen to love Amazon, but this has too much tech, and you will get hurt on a bad tech day like we had yesterday. But thank you for the call. I'm glad you got out of Chewy. Can't seem to hold the 25 level. All right, next up, we've got Joe in my home state of New Jersey. Joe. Hello, Mr.

34:30Kramer, and thank you for taking my call. I just want to let you know tomorrow I will be in La Valette surf fishing, and I still haven't gotten a strike bass. Hopefully tomorrow is the day. You will. La Valette, man, I fish there. I fished Normandy Beast with Fordo. You know, I do a lot of fish in that area. I love LBI fishing. Love. My five stocks are Apple, Costco, Cisco Systems, Microsoft and Merck. Mr. Kramer, am I diversified? All right. Now, this is another tough one. Joe's got me over a barrel here. Well, obviously, I like Merck and I think that they are doing incredibly well. It's just been a good, good period for them.

35:17Saw you a bunch of number bumps today. Costco, I go to my Neptune Costco down there, Joe. I don't know if you passed the Neptune Costco on the way down to Lavalette. If you did, you'd be taking the wrong way, but that's okay. It's pretty good. Apple's on it. Don't trade it. So now what do we do? We have Microsoft and Cisco. Now, I got Deacon. I mean, I don't know. Chuck Robbins is probably listening. Chuck never misses the show. Chuck, you have to trade your Cisco, Joe, because you got to go in. You got too much tech. And wherever we look, we've got data center exposure, whatever. I think that you need to be thinking Wells Fargo.

35:53I really like Wells Fargo. They report next week. It's going to be very good. Microsoft, again. Satya, I love Amy Hood. I mean, like, I'm looking at my executive person. I know how much I think of Amy Hood. Great. Tremendous commencement address. It's true this year. Instead of that one, instead of Microsoft, I want to go with RTX. And I'm going to go with RTS. We're in Boeing right now, but RTX is down worse than Boeing, even if you can imagine, because there's also defense just for this moment. And I want to see how that acts. But anyway, I have to make these changes because yesterday this portfolio was killed.

36:28And that's not what people want. Now let's go to Tony in Florida. Tony. Hey, Jim, thank you very much for everything you do. I know I really mean it. Thank you very much. I'm going to keep doing it. Don't worry. Okay, let's go. I hope you do. My five stocks are Amazon, AMZN, Simon Properties, SPG, Palo Alto, P-A-N-W. Then we got CVS and Verizon VZ. All right, let me go to work on this. Yeah, let me go to work on this. Okay, Verizon, we saw how they were crushed today by the fact that SpaceX is going into the inner city. which is going to be in skyscrapers and everything. It'll probably bounce, but I directly believe that when SpaceX comes in as I'm a user of SpaceX, then everybody else does indeed eventually get blown out.

37:24So we're going to keep that, but we're going to be mindful that I would rather see you in SpaceX. CVS, we passed the test of those, the star test that we were worried about for the plan. CVS did fine. We're going to call that health care now. We're not going to just call it retail. Palo Alto Networks and Cyber Securities. They do, this is Nikesh Arora, who my soul was with the president. I thought that was terrific, Nikesh. Simon Properties, I was in a beautiful Simon Property Mall about 30 minutes from Florence. It was fantastic. The late David Simons built an amazing company. And then Amazon, we were trying to call that a data company earlier or a retailer.

37:59I think you could do both. Healthcare, retail, real estate investment trust, cybersecurity, and telco. That's perfect. I'll take that. I mean, I know some people say, well, Jim, come on, Amazon and Palo Alto. No, I'm willing to accept that. Those are two different buckets. And I want to thank everyone for playing on Ferrari. Very, very difficult. Because everyone's so riddled with tech. Got to be very careful. Go check to see my portfolio that I have for the CNBC Investing Club for some more diversification. Everybody needed it. And I'm just back after a break.

38:39It is time to talk to the White Mountain Clamers. I'm going to start with Richard New York. Richard!

38:56Cheery, Jim. Chee-hoo! Thank you for taking my call, sir. My pleasure. I'm a good listener. And I've done a lot of... I owe all my success to listening to you, and I appreciate it. Thank you very much. Thank you. A little pride. Thank you. This is the longest day in history. Thank you for that. You're welcome. I'm calling about a stock, Cortiva, which I've owned recently. It got spun off with Weiler. And there's a compelling reason to keep, or I mean, for both to be successful. What do I do? Do I keep two? No, I want you to keep the Bible. We did a pretty good analysis. Ben Stoto, our chief research director and also our only research director, really was that he and I would be beating around this thing.

39:37And there's absolutely no reason why you would want to own this one over the Vylor, which is absolutely a better one, I think. Let's go to Bobby in Rock, Carolina. Bobby. Hey, Jim, I've been watching you all my life. You are legendary. I want to commend your beautiful staff. They never gave up on me when I'm impatient. My start is Onto. O-N-T-O. I do. I do not plan. All right, here's what I want to do. You're obviously really fired up, and I really like that. And we're going to take a harder look at Onto, because it's another one of these companies that's process control solutions, and they're all really hard to understand.

40:21And I'm going to give you, because of the way you came in fired up, a better read than I can just say I like it. You deserve better than that. Let's go to Larry in New Jersey. Larry. Hey, Jim, a big booyah to you. Larry Clark from Wayne, New Jersey. Oh, great. I like Wayne. What's going on up there today? Good, good. I'm going to do some paintball up there. We'll do some paintball. What's going on? Right? Well, we had a big ball here as well. Calling about a real estate mortgage REIT as opposed to the mortgage REITs, which have been getting hammered lately. The company owns properties, 220 hotels in high-end suburban areas and in developing urban areas as well.

41:05So, Sheritans. Okay, I know it. High-end hotels, Hiltons and Marriott. I know it. The problem, I know it, Larry. Here's the problem. If I think rates are going to go to 6%, if I think rates are going to go to 6%, then I can't own that. I can't own that stock. You're going to end up losing money to buy that stock. And I think rates can go to 6%. Let's go to Doug in Virginia. Hello, Doug. Hello, Jim. It's an honor to speak with you. I'm a first-time follow, long-time... Yes. Excellent. Thank you. Yes. What's up? Yes, Jim. I'm interested in your opinion on EchoStar in light of their deal with SpaceX for a long-term investor.

41:45Okay, I have to tell you, I read today a very informative piece about how EchoStar could get a bid from SpaceX. It was very compelling. I've not liked this talk, but I certainly cannot be oblivious to that takeover talk. Let's go to Jerry in Illinois. Jerry. Good day, Jim. I'm probably one of your earliest followers. All right. A member of the club forever. Oh, thank you. I love club members. Jim, courtesy of Jim Clayton, Jim Kramer and Mad Money. You put my son through college. I'm forever grateful. Thank you. I can't make up my question. Thank you. I mean, I'm not making this up. I don't know this caller and Jerry from Illinois is kind enough to say that.

42:30Thank you, Jerry. Thank you. It's a fact. It is a fact. We're heavy into Eli Lilly. My wife branch out to a company, Jazz Pharmaceuticals. OK, now you're starting to go into a very speculative situation where they actually do make money, though. I'm going to say yes to Jazz Pharmaceuticals. I think the bio-techs between here and the J.P. Morgan Conference are going to do very well. I like that one, and I thank you for the kind comments. And that, Lenzo, is the conclusion of the Lightning Round! The Lightning Round is sponsored by Charles Schwab.

43:15We need to do something. We need to retire the term trade, as in the AI trade. That's the wrong way to speak about a gigantic industry that's very much here to stay. Far too often we hear traders query, is the AI trade over or is the AI trade dead? That's confusing to you. When you talk about the AI trade, that makes it sound like there's this group of high-flying stocks that are always on the verge of collapse. That couldn't be further from the truth. Take the last 48 hours. We've heard about this small Australian data center builder that's had to pull its IPO. But the deal was poorly structured and priced much too high before it was pulled.

43:57More than half of the insider stock could have been sold as soon as the darn thing started trading. That's insane and stupid. Normally, the vast majority of insider selling is frozen for at least the first six months. Nobody questioned the unbelievably boneheaded structure of the deal. All I heard was, is this it? Is this how the AI trade unravels? Is the AI trade dead? Then we heard about the alleged slowdown in open AI, the one I talked about earlier. We got the same nonsense. There are so many chicken littles out there. It's amazing that anyone owns these stocks. Some people seem bent on bad-mouthing this group, no matter what happens.

44:31But what I think people are missing is that when the largest companies on Earth are spending hundreds of billions of dollars, believe me, they aren't just participating in some trade. They're investing in something that they are certain will make them a lot of money, and they are smarter about their business than we are. The idea that it's all just going to unwind or collapse because of some poorly structured Australian IPO, that is farcical. Now, it is true that a hedge fund using way too much leverage imploded back in July situational awareness, and that temporarily crushed the entire AI complex.

45:04That made us feel like the whole group was fragile, because how else could it be laid low by a single hedge fund? But that fund controlled tens of billions of dollars by using margin. margin. They bought stock on margin. They didn't really understand it. And that way it is possible to bring any stock down if the stock starts going down once you have a huge position on borrowed money and they get forced to sell it all at once. That happened to many of the stock that this hedge fund owned. The person who ran the fund only had eyes for AI. And the person who ran the fund didn't understand the ramifications of trading with borrowed money.

45:40So what should we call the AI trade. Look, there are companies that build data centers and companies that provide power sources. There are companies that provide components. There are companies that have data storage, both in the cloud and the flash drives and hard drives. In the end, I would call it the artificial intelligence industry because that's what it is. Sure, there's the huge assemblage of NVIDIA chips controlled by SpaceX. They generate what's known as compute. You can call it the compute industry if you want. Compute can be bought, sold, and traded. Right now, SpaceX is getting about between$3 and$4 billion a month from several hyperscalers that need the extra compute power.

46:16That's not what I am talking about when I mention the AI industry. I'm saying you have to consider these companies as part of the, say, new oil that runs the economy. It's everywhere. It's pervasive. And if you don't use it, you're riding around in a horse-drawn carriage just waiting to be steamrolled by the competition. Listen, at one time, Standard Oil had almost 100 % of the oil market. It was a monopolist. The government broke it up. Although by that point, they didn't really mind because they just made even more money in separate enterprises. But what matters is the Standard Oil pioneered a product that became a universal, universal with trillions of dollars in infrastructure behind it.

46:50Was it a trade? No. It was an investment, as were many oil companies, oil service companies, pipelines, refiners, gas stations. AI is the new oil. It, too, is an investment. Let's call it that and recognize that it isn't going away whether some Australian IPO doesn't do well or we have a bad headline for the Financial Times. The standard oil could never be taken away. It wasn't possible. There will just be many companies created to exploit what we now see in this version of standard oil. You can call them a lot of things, but a trade, it isn't one of them. I like to say there's always a bull market somewhere.

47:25I promise I'll find it just for you right here on Mad Money. I'm Jim Cramer. See you Monday. All opinions expressed by Jim Cramer on this podcast are solely Cramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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