'Worrisome': Jim Cramer warns chip stocks have gone 'parabolic' — here are the defensive moves he's making now

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CNBC’s Jim Cramer is scared that the surge in semiconductor stocks could be setting up for a nasty pullback.

In a Mad Money episode back in April, Cramer focused his fears on the recent outperformance of the Philadelphia Semiconductor Index (SOX), which posted a historic 18 consecutive winning sessions in April.

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Even with a recent dip, the SOX has climbed very far and very fast, by roughly 64% year-to-date as of Oct. 28 (1).

But what’s really spooking Cramer about this rally is its resonance with one prior bull run: The only time the SOX did better than April 2026 was in February 2000, right before tech stocks hemorrhaged in the dreaded dot-com bubble (2).

Back then, the SOX traded in the 1,100 range at the bubble’s peak, but it fell as low as 238 a few years later (3).

Granted, there were other impressive increases in the SOX’s history that didn’t correlate with declines and Cramer isn’t quite ready to declare that we’re headed for a similar crash this time around. But he did tell his viewers that these “parabolic moves all over the market” are “worrisome,” CNBC reports (2).

Cramer then presented some in-house analysis on U.S.-listed companies in the chip or AI data center sector that posted 50%+ gains since Mar. 30. According to his data, 94 companies fit this category, including big chip players such as AMD, Marvell Technology and Intel.

And it’s not just Cramer that’s sounding alarm bells on semi and AI-related stocks.

CNBC reports that Goldman Sachs and Morgan Stanley also feel these types of high-tech stocks are overextended and due for a decline.

From orbital to oversold: The case of POET Technologies

To illustrate why he’s so fearful of a drop in chip stocks, Cramer pointed out one small semiconductor name that is already down big time: POET Technologies [NASDAQ: POET].

At the start of April, this semiconductor startup rode a massive wave of momentum from $5 per share to about $15 at its recent peak (4).

However, one bad headline virtually erased POET’s price pump.

After news broke that Marvell Technologies wouldn’t partner with POET, the stock cratered 47% in a day, MarketWatch reports (5). A week before POET’s reversal, Cramer criticized the company as too small and speculative when a viewer asked about it on Mad Money.

After mentioning POET on his show, the company had two days with over 20% increases, thanks in part to the extra media attention. Cramer now says the steep decline in POET’s value should serve as a cautionary tale for overinflated expectations in the chip sector.

As Cramer said on his show, “That’s exactly the kind of thing that I’m worried about when I see all these parabolic moves” (2).

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So, is it time to sell off chip stocks?

Although Cramer has concerns about the sustainability of the latest tech rally, he hasn’t gone full bear-market mode just yet. The Mad Money host is eyeing dips in some chip companies like Arm Holdings to jump in at better prices (2).

But at these current levels, Cramer says he started selling a portion of winners like Qnity Electronics to lock in gains and avoid getting caught in a downturn, if it arrives.

“When you see these kinds of moves, you don’t need to freak out. But you’ve got to be disciplined,” Cramer said. According to his strategy, that means taking some profits if you’re up big and avoiding the “parabolic stuff like POET Technologies.”

Overall, Cramer wants everyone in the chip or AI trade to step back and take a chill pill. As he put it, “Keep your cool. And let’s wait to see if we have a more benign pullback from these wild past few weeks, setting us up for more gains ahead.”

​But Cramer still warned investors that “if the stocks keep flying, well, that is when you need to worry.”

Here are a few ways to weather potential headwinds.

Balance the AI buzz with broader market exposure

The AI boom has been a powerful tailwind for chipmakers and other technology stocks over the past two years. But it has also created enormous expectations for the companies at its center.

Investors want more than impressive revenue growth. They want proof that spending billions on AI chips, computing power and data centers will translate into lasting profits.

There’s another concern to keep in mind — how that spending is financed. U.S. federal debt has reached $40.58 trillion, while elevated borrowing costs can make it more expensive for companies to fund ambitious expansion plans.

“We can still see that the AI demand has not paused… the ‌number ⁠one worry for investors is not AI valuations anymore, but it’s the financing through debt as debt goes through the roof in the US,” said Nadia El Bilassy, senior market analyst at Equiti Group (6).

While AI stocks made a slight recovery in late October, Cramer cautioned against treating the rebound as an all-clear signal.

“I’m pleased that people feel so comfortable that tech is all good to go because there is money flowing back in,” he said. “I don’t think that’s a reason to call all clear. I think it’s a reason to look at other sectors in the economy (7).”

That advice is particularly relevant if a few semiconductor or megacap technology holdings account for a large share of your investments.

Instead of keeping all your eggs in one tech basket, consider expanding your portfolio to include 500 of the largest U.S. companies across a much wider variety of economic sectors. The S&P 500 index includes companies across 11 diverse sectors — like financials, healthcare, industrials and energy — offering a more balanced investment (8).

Start small and stay consistent

You don’t need thousands to begin investing in the S&P 500 index.

Consistency often matters more than the size of your first investment. Small, regular contributions can snowball into substantial savings thanks to the power of compound growth.

You can even start with spare change from everyday purchases, which can add up and have a meaningful impact over time. For instance, investing just $20 per week for 30 years could grow to more than $179,000, assuming it compounds at 10% annually (9).

Automating the process can make staying consistent much easier. Apps like Acorns allow you to turn your spare change from everyday purchases into an investment opportunity. This way, you can steadily grow your investments without dramatically changing your spending habits.

Signing up for Acorns takes just minutes: All you have to do is link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio managed by experts at leading investment firms like Vanguard and BlackRock.

With Acorns, you can invest in an S&P 500 ETF with as little as $5 — and, if you sign up today and set up a recurring investment, Acorns will add a $20 bonus to help you begin your investment journey.

Get tips from experts

If Cramer’s concerns have you rethinking your exposure to soaring chip stocks, you might be wondering where the next investment opportunity could emerge.

A promising investment isn’t necessarily the stock that’s climbing the fastest today. It could be a business with a durable competitive advantage, room to grow its earnings or a financial position that helps it weather a potential downturn.

Of course, spotting this before a stock takes off requires time and careful analysis. Even experienced investors can misjudge a company’s prospects and a business with an exciting story doesn’t always turn into a profitable investment.

That’s where professional research can help.

Platforms like Moby can help you identify stocks with strong growth potential, helping investors uncover opportunities they might otherwise overlook.

Their team of former hedge fund analysts and experts spend hundreds of hours each week sifting through financial news and data to provide you with breaking stock recommendations.

Moby’s success speaks for itself. The platform’s stock picks have outperformed the S&P 500 index by about 11.9% over the past four years.

Even better, Moby offers a 30-day money-back guarantee so you can see if the service is right for you. And if you sign up for Moby Premium, you get one free top stock to get you off to a good start.

Add a defensive asset

Owning an S&P 500 index fund can help reduce company-specific risk, but it doesn’t eliminate market risk altogether. If there’s a broad market sell-off, even diversified equity portfolios can take a hit.

That’s why many investors look beyond the stock market.

With geopolitical tensions resurfacing and inflation remaining a concern, adding assets that don’t always move in lockstep with stocks can help smooth out returns over time.

Gold has long been viewed as a reliable hedge against systematic market risk.

During periods of economic uncertainty, persistent inflation or geopolitical turmoil, investors often turn to the precious metal as a defensive asset — pushing prices higher.

That demand has helped gold prices more than double over the past five years, hitting multiple record highs along the way and outpacing the S&P 500 over the same period.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today.

Invest in real estate with as little as $100

Another asset class that doesn’t always move in tandem with the stock market is real estate. Property values are driven by a different set of economic factors, making real estate another useful way to diversify a portfolio.

In addition to potential appreciation, rental properties can generate steady income through rent payments, giving investors another source of returns outside the stock market.

The catch, of course, is that buying an investment property means a large upfront investment in the form of a down payment. Not to mention, ongoing responsibilities like finding reliable tenants, handling maintenance and paying for unexpected repairs can quickly become a second job and eat into your returns.

That’s where platforms like Arrived come in.

Backed by world-class investors like Jeff Bezos, Arrived lets you purchase shares of vacation and rental properties across the country. And you can get started with as little as $100.

Arrived distributes any rental income generated by properties to investors monthly, allowing you to potentially set up a passive income stream without the extra work that comes with being a landlord of your own rental property.

The best part? For a limited time, when you open an account and add $2,000 or more, Arrived will credit your account with a 2% match.

– With files from Eric Esposito.

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MarketWatch (1), (2), (3); CNBC (4), (5); Yahoo Finance (6); Fidelity (7); Investopedia (8); Acorns (9)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.