GoKawiilCNBC's Jim Cramer said Monday the AI boom has rewritten the rules for memory stocks and their massive rallies may not be over.
"While I acknowledge that I am not early, I do not think I am late," the "Mad Money" host said.
Memory stocks have been among the biggest beneficiaries of the AI trade this year. Cramer noted that Sandisk has surged 653% this year, Seagate has jumped 261%, Micron has gained 254% and Western Digital has climbed 211%.
Those gains would normally make Cramer wary, particularly given the industry's history. Memory manufacturers have repeatedly responded to booming demand by aggressively expanding production, eventually creating excess supply that sent prices, profits and their stocks tumbling. However, Cramer thinks this cycle is different.
"Memory's in such short supply that Elon Musk has taken to X to talk about how it's become the key bottleneck to data center growth," Cramer said.
Just as importantly, Cramer said memory makers have become more disciplined. Instead of aggressively adding capacity, the companies are increasingly securing long-term customer agreements that lock in attractive margins for years.
"They are basically building only to suit," he said.
Cramer pointed to share repurchases as further evidence that the industry has learned from past cycles. Sandisk has $15.5 billion remaining under its share repurchase authorization, while Seagate is working through a $5 billion buyback program announced last year. Western Digital authorized an additional $4 billion in share repurchases earlier this year.
"They're taking that money and sending it to you, the shareholder, rather than investing in new capacity," Cramer said.
Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, recently initiated a position in Micron, which he favors for its growth potential. While Cramer acknowledged the discomfort of buying after such a dramatic rally, he says strong AI demand and long-term customer agreements can support further gains.
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