Jim Cramer says Big Tech is underspending on AI. Here's why

CNBC’s Jim Cramer on Thursday affirmed his faith in the earnings power of artificial intelligence, telling investors that Big Tech hyperscalers aren’t spending too much on the new technology.

“These companies aren’t overspending on AI, they are actually underspending on AI,” Cramer said. “See, this is a winner-take-all, loser-take-none situation. The only reason to spend less is if you don’t believe you can win.”

Tech megacaps have been shelling out more and more money on AI as the race for dominance in the field intensifies. Meta, Amazon, Alphabet and Microsoft intend to spend as much as $320 billion combined on AI technology and datacenter buildouts in 2025, CNBC reported. That’s a marked increase from $230 billion in total capital expenditures in 2024. Companies have especially been clamoring for AI products from Nvidia. The AI darling has seen its market cap swell dramatically over the past few years. Nvidia became the first-ever company on the market to reach $4 trillion earlier this month, securing its status as the largest outfit in the world.

There are some on Wall Street who believe tech giants’ AI investments will not pay off, Cramer said. But Alphabet’s recent quarter suggests that such criticism is unwarranted, he said.

Alphabet comfortably beat estimates for earnings and revenue when it reported Wednesday night. The company also announced it would add $10 billion to its capital expenditures, citing growing demand for its cloud services. The search giant is continuing to bolster infrastructure in order to power AI services that use its cloud technology.

Alphabet’s spending seems justified to Cramer, he said, which makes him think that these investments are “both urgent and needed.” AI spending has also been driving market gains, he added.

Cramer conceded that he understands some of the AI skepticism, especially from those who are wary of chatbots. He described the way he’s seen AI chatbots make mistakes and even fabricate information. But Cramer indicated that the technology will improve, especially as companies buy more advanced chips from Nvidia.

“My take is that Google is upping its spending because the most accurate chatbot will be the winner, just like how Google search won to begin with,” he said. “The bots that are wrong too often will lose. And just like Google search, if you win the AI race, you can end up with a near monopoly and hundreds of billions of dollars in profits.”