Ongoing government shutdown AI fears market pressure Jim Cramer

CNBC’s Jim Cramer unpacked Thursday’s market decline, telling investors that Wall Street is worried about the lengthy government shutdown and that artificial intelligence buildout is getting out of control.

“What matters is we need the darn government to go back to work, and we need the data center blob to be cordoned off from the rest of the economy, and we need some of the hottest stocks to continue to cool off further,” he said. “Until then, we are indeed at the mercy of the headlines and, lately, the darned negative headlines are the only ones that anyone’s paying attention to.”

The averages closed in the red, with the Dow Jones Industrial Average finishing down 0.84% and the S&P 500 dipping 1.12%. The Nasdaq Composite sank 1.9%, and the tech-heavy index is on pace to have its worst week since early April.

The federal shutdown entered its 37th full day on Thursday and is the longest in U.S. history. Hundreds of thousands of employees remain furloughed or are working essential jobs without pay. The ongoing shutdown has delayed key official economic data, Cramer said, so investors are largely in the dark about the health of the economy. But he pointed to a few pieces of other information, including one firm’s report that suggests job cuts in October hit their highest level for the month in 22 years.

Cramer referenced analysis by JPMorgan‘s Michael Cembalest, who suggested an AI and data center “blob” is starting to engulf many parts of the economy. Cramer said the blob has become “increasingly menacing” as giants like OpenAI commit to spending billions on new technology. Investors were spooked when OpenAI CFO Sarah Friar suggested earlier this week that the government could backstop her company’s data center buildout, he noted. Friar later denied that OpenAI needs a federal backstop, but Cramer indicated many on Wall Street remain wary.

“We’ve been able to skate past the bear for the past few weeks,” he said. “I don’t think that’s possible any longer.”