Jim Cramer says AI stocks are climbing as DeepSeek threat recedes on Wall Street

CNBC’s Jim Cramer on Tuesday told investors the market no longer seems to be concerned about the potential for Chinese startup DeepSeek to outpace the tech titans currently leading in the artificial intelligence arena.

“This data center renaissance, so shocking to the people who abandoned these stocks — the Nvidias, the AMDs, the Vertivs, the Microns, the Marvell Technologies — are all back or nearly back,” he said. “And the story…that Nvidia CEO Jensen Huang calls the new industrial revolution, is once again front and center. It’s like DeepSeek never happened. The AI stocks, they’re all breaking out.”

The indexes climbed on Monday as Wall Street bet that the fragile cease-fire in the Middle East would stick. The Dow Jones Industrial Average jumped 1.19%, the S&P 500 rose 1.11% and the tech-heavy Nasdaq Composite advanced 1.43%. Semiconductor stocks outperformed during the session, as Broadcom soared to new heights, up 3.94%, while Nvidia and Advanced Micro Devices saw gains, up 2.59% and 6.83%, respectively. The Nasdaq 100 also hit a new all-time closing high, finishing up 1.53%.

Back in January, DeepSeek released an AI model that seemed to be as advanced as competitors while requiring far less money and energy to function. Investors panicked at the news, fearing that Big Tech had spent too much building data centers and AI models, and many companies in the sector saw their stocks get crushed. AI darling Nvidia, whose market cap has ballooned quickly over the past few years as the tech world clamored for its products, plummeted 17% in one session. The semiconductor outfit lost close to $600 billion at the time, marking the largest ever single-day drop for a U.S. company.

According to Cramer, the recovery of many AI stocks shows that fears about DeepSeek’s dominance are short-lived. This rally is also a “refutation” of the idea that China had beat the U.S. in the AI arms race, he said.

Wall street’s DeepSeek panic, he said, is a “microcosm” of the kind of situations that cause investors to make mistakes and unnecessarily write off certain stocks. Many did not question DeepSeek’s assertions, Cramer said, even as some experts warned the data could be misleading.

“Now, looking back, with so much of tech bordering on new highs, it’s clear that these stocks never should’ve been sold in the first place,” he said. “Because DeepSeek simply wasn’t that meaningful.”

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Disclaimer The CNBC Investing Club holds shares of Nvidia and Broadcom