Jim Cramer makes a bold call on AI as stocks waver

By Damilola Esebame TheStreet

Updated May 9, 2026 4:21 PM

Three major stock indexes pulled back on May 7 after touching fresh intraday highs earlier in the session, giving back gains from a record-setting rally. The Dow Jones Industrial Average dropped 313.62 points to close at 49,596.97, the S&P 500 slipped 0.38% to close at 7,337.11, and the Nasdaq Composite eased 0.13% to end at 25,806.20, CNBC reported.

Geopolitical anxiety around the U.S.-Iran conflict, fluctuating interest rates, and signs of slowing consumer spending gave bears plenty of ammunition to argue for a deeper correction. For anyone watching a retirement account or a brokerage portfolio, the question hanging over the market felt urgent and deeply personal.

CNBC's Jim Cramer offered a sharply different read from his Mad Money set, waving off the selling as a healthy breather and pointing to the artificial intelligence infrastructure boom as a force strong enough to keep the broader market afloat through near-term turbulence.

Cramer says AI demand is real and the market pullback is healthy

Cramer's core argument centers on a straightforward claim: the AI buildout is not speculative, and companies pouring hundreds of billions into data centers are responding to customers who are already lined up and paying. He pushed back against comparisons to the dot-com bubble, arguing that cloud providers are racing to keep pace with existing demand, CNBC reported.

He described the May 7 retreat as an expected cooling-off period after weeks of surging gains in AI-related names, many of which had made sharply vertical moves in recent sessions. Cramer noted that a pause was overdue and that investors should welcome price consolidation rather than a climb without a breather, CNBC reported.

Big Tech's $805 billion AI spending spree backs Cramer's thesis

Cramer's confidence rests on spending commitments from the world's largest technology companies, which provide concrete backing for his optimism. Morgan Stanley recently raised its capital expenditure forecast for five major hyperscalers to a combined $805 billion in 2026, up from a prior estimate of $765 billion, Benzinga reported.

The 2027 forecast for capital expenditure has climbed to roughly $1.1 trillion. Amazon alone has committed to spending $200 billion this year, while Alphabet raised its estimated spending to $180–$190 billion. Microsoft is on track for roughly $190 billion, while Meta falls into the $125–$145 billion range, and Oracle rounds out the five hyperscalers driving the $805 billion forecast, according to Benzinga.

Qi Yang/Getty Images

AI investment already drives 75% of U.S. economic growth

The macroeconomic data reinforce Cramer's position with numbers that would have seemed implausible just a few years ago in any previous spending cycle. The Bureau of Economic Analysis reported that the U.S. economy grew at a 2% annualized pace in the first quarter of 2026, rebounding from 0.5% in the prior quarter, with AI-related business investment serving as the primary catalyst.

David Sacks, the former White House AI and crypto czar, noted in a May 3 post on X that AI-related capital expenditures accounted for roughly 75% of first-quarter GDP growth.

Investment in information processing, software, and research contributed 1.52 percentage points to the quarter's 2% growth rate, outpacing consumer spending's 1.08-point contribution for the first time in recent memory, Fortune reported.

More AI:

The surge in AI spending is also reshaping where corporate America directs capital, with semiconductor manufacturers, cloud providers, utilities, and construction firms all benefiting from the race to expand computing capacity.

Demand for advanced chips, power infrastructure, cooling systems, and data center real estate has accelerated as companies compete to secure the computing resources needed for large-scale AI models. Economists increasingly view the buildout as one of the largest industrial investment cycles in decades, stretching far beyond traditional technology companies.

Key economic data points on AI's GDP impact

U.S. GDP grew at a 2% annualized pace in Q1 2026, rebounding from 0.5% the prior quarter, the Bureau of Economic Analysis reported.
Business investment contributed 1.52 percentage points to GDP growth, surpassing consumer spending's 1.08-point contribution, Bureau of Economic Analysis data showed.
Morgan Stanley projects $805 billion in combined hyperscaler capital expenditures for 2026, up from a prior estimate of $765 billion, Benzinga reported.
The 2027 capex forecast has risen to approximately $1.1 trillion, nearly triple the levels spent in 2024, Morgan Stanley estimated.

Cramer warns against complacency even as AI spending reshapes the economy

The latest market pullback underscored how heavily investor sentiment now depends on the trajectory of artificial intelligence spending and corporate confidence in future demand.

While geopolitical tensions, interest rates, and slowing consumer activity continue pressuring markets, the scale of AI-related investment has become a defining force shaping economic growth, hiring, and technology infrastructure across multiple industries.

"Businesses are investing heavily in technology to boost productivity and profitability. Fast is getting faster, and speed, scale, and efficiencies don't happen without technology," said Terry Sandven, chief equity strategist, U.S. Bank Asset Management Group.

Cramer's comments reflect a broader shift on Wall Street, where artificial intelligence is increasingly viewed not as a short-lived trend but as a major economic transition with consequences reaching far beyond Silicon Valley. Whether markets remain stable may depend on how long that momentum continues translating into measurable business results.

What the market pullback means for your portfolio

If you hold an S&P 500 index fund, a target-date retirement fund, or individual tech stocks, the May 7 retreat likely showed up as a small red number on your account balance. Those losses came just one session after all three indexes had closed at record highs on May 6, when the S&P 500 hit 7,365.12 and the Dow touched 49,910.59, CNBC reported.

The bigger question is whether one red day signals a reason to act. U.S. Bank Asset Management Group's Sandven points to estimated 2026 earnings growth above 16% as a sign that the fundamentals supporting most diversified portfolios remain intact, even when headlines turn volatile.

Context matters for long-term holders. As of mid-April, the S&P 500 had rebounded to its February 27 pre-Iran conflict close after coming within roughly 10% of its January all-time high, meaning anyone who held on through the spring volatility is roughly back where they started.

Historically, the S&P 500 has averaged intra-year declines of about 14% since 1990 even in years that finished positive, a reminder that single-session pullbacks like May 7's are normal market behavior, not a signal to abandon a long-term plan.

The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.

This story was originally published May 9, 2026 at 4:03 PM.