Jim Cramer Says 'Electric Power Gating' And OpenAI's Balance Sheet Will Halt Hyperscaler AI Spending Spree

CNBC host Jim Cramer has endorsed a new J.P. Morgan report suggesting that physical and financial limits—not a market crash—will naturally curb the massive spending by tech giants on artificial intelligence (AI).

The ‘Gating’ Factor

Cramer, responding to Michael Cembalest's “Smothering Heights” annual outlook, argued that fears of an AI bubble akin to the dot-com era lack nuance.

Instead of a valuation collapse, Cramer pointed to “electric power gating” as the primary force that will stop hyperscalers from overspending.

The J.P. Morgan report identifies U.S. power generation constraints as a critical “What Could Go Wrong” risk for the AI sector.

While data centers are projected to drive two-thirds of U.S. load growth, the grid is struggling to keep pace, adding only 25 GW of reliable capacity in 2024.

This physical scarcity of electricity acts as a hard cap on how fast companies can deploy new infrastructure, effectively “gating” their capital expenditures regardless of their ambition.

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Financial Reality Check

Beyond power limits, Cramer highlighted that major players like OpenAI “will be constrained by its balance sheet.”

The J.P. Morgan report details massive financial commitments that may outstrip current revenues. For instance, OpenAI has committed to pay Oracle Corp. (NYSE:ORCL) $60 billion per year for compute facilities that haven’t been built yet—an amount the company does not yet earn.

With OpenAI facing $1.4 trillion in commitments to corporate partners while surviving primarily on subscription fees, the path to profitability remains a major hurdle.

Cramer suggests these tangible constraints on power and capital will force a slowdown in AI spending, preventing the runaway speculation that characterized the 2000 market bubble.

Here’s a list of AI-linked ETFs for investors to consider.

Beyond The Grid: Financial & Valuation Realities

The J.P. Morgan report further supports Cramer’s call for “nuance” by contrasting today’s market with the dot-com bubble.

Unlike the “young unprofitable companies” (YUCs) of the late 1990s, today’s high valuations are underpinned by extraordinarily high profit margins, with 42 AI-related companies generating up to 75% of S&P 500 earnings growth since late 2022.

However, a shift in financing is underway. The report notes that while the current capital spending boom was initially funded by internal cash flow, companies like Meta Platforms Inc. (NASDAQ:META) and Oracle are increasingly turning to debt markets to fund data center expansions.

This rising reliance on debt—Oracle's credit spreads have already widened by 90 basis points—introduces a new discipline that reinforces Cramer’s view: balance sheets, not just stock prices, will ultimately dictate the pace of the AI revolution.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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