AI buildout spend is justified even if there are ‘casualties,’ Jim Cramer says

Big Tech’s enormous spend on new artificial intelligence will be worthwhile, according to CNBC’s Jim Cramer, even if there are some companies that don’t necessarily reap rewards.

“I am telling you, this is just the beginning,” he said. “The buildout will have casualties. So did the rise of the railroads. So did the steam engine and the assembly line and the internet.”

Generative AI is ushering a new industrial revolution, Cramer suggested, comparing the technology’s significance to the invention of the steamboat, mass production, railroads, as well as semiconductors and personal computers. These innovations were “tectonic shifts in the way the world works,” Cramer said.

Global AI spend has snowballed over the past few years, and UBS predicted total investment would hit $375 billion in 2025 and top $500 billion by 2026. AI-related stocks have propelled the market to new highs, and semiconductor giant Nvidia — one of the biggest beneficiaries of the AI boom — became the first stock ever to hit $4 trillion in market cap.

Some on Wall Street are wary of this enormous spend — worried the AI boom will go the way of the dotcom bubble and burst, taking the rest of the market with it.

Cramer likened the AI data center buildout to railroads in particular. At first, a lot of railroad companies were “laying track all over the place,” and they “overbuilt like crazy with borrowed money,” he said. While many individual railroads collapsed, the technology had staying power, Cramer added, saying that “once the losers got wiped out, the winners won big.”

AI’s potential to transform the enterprise alone can’t really justify the entire data center buildout, Cramer conceded. However, he emphasized that he thinks this facet of AI is just the start of its capabilities.

Cramer expressed faith in many of the biggest power players in the AI game, especially after his trip to San Francisco for Salesforce‘s annual tech conference. He named Meta‘s Mark Zuckerberg, Tesla‘s Elon Musk, Nvidia‘s Jensen Huang, OpenAI’s Sam Altman and AMD‘s Lisa Su.

“I can tell you that these people behind the AI revolution, they’re not clowns, they’re not mountebanks. They’re the best we have,” he said. “You can question them, but my charitable trust is investing in them. After this trip, I definitely wouldn’t bet against them. I’d choose one or two and hold on for the ride.”

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Disclaimer The CNBC Investing Club holds shares of Nvidia, Meta and Salesforce.