Jim Cramer’s Take on Cerebras, the Hottest New AI Chip Stock

Cerebras Systems, the AI chip designer, experienced a meteoric debut on the public markets Thursday, but investors are being urged to exercise caution. Jim Cramer, host of CNBC’s “Mad Money,” advised against chasing the stock at its current stratospheric valuation, emphasizing the need for a significant pullback before considering an investment.

“While there might be a situation in the future where I can recommend Cerebras, I just can’t even come close to justifying the valuation up here given how much it’s already run right out of the gate,” Cramer stated. “For now, I say keep your bat on your shoulder and hope the stock gives you a giant pullback. Because at these levels, it’s too rich for me.”

Cerebras priced its initial public offering at $185 per share Wednesday, exceeding its anticipated range of $150 to $160. The stock then surged, opening at $350 on Thursday and closing the session at $311. This robust performance propelled the company’s market capitalization to approximately $95 billion, with shares even touching a high of $386 during intraday trading. This marks the largest IPO of the year.

The fervent investor enthusiasm for Cerebras is not without its underpinnings. Founded in 2015, the company has engineered what it describes as “the largest commercial chip in the history of the computer industry.” This innovative processor is fabricated from an entire silicon wafer and is purpose-built to accelerate artificial intelligence workloads. According to its IPO prospectus, Cerebras processors can deliver performance gains of up to 15 times greater than leading GPU-based solutions for specific tasks and over 10 times faster in certain AI training applications. This technological differentiation is a key driver of its market appeal.

Furthermore, Cerebras has secured several high-profile strategic partnerships that could fuel its future growth trajectory. Earlier this year, the company announced a substantial multiyear agreement with OpenAI, valued at over $10 billion, to supply 750 megawatts of computing capacity. In parallel, Amazon Web Services has committed to deploying Cerebras chips alongside its own Trainium processors, indicating strong validation from industry giants. Both Amazon and OpenAI also hold warrants to acquire Cerebras stock, aligning their interests with the company’s long-term success.

Cerebras has also demonstrated impressive revenue momentum. Last year, the company generated $510 million in revenue, representing a significant 76% increase year-over-year. This follows a period of exceptional growth where sales more than tripled in both 2023 and 2024. While Cerebras currently operates at a loss, Cramer noted that its rapid expansion and lack of debt mitigate immediate concerns, allowing for a focus on scaling its innovative technology.

However, Cramer strongly cautioned against overlooking the inherent risks, chief among them being the stock’s formidable valuation. At Thursday’s closing price, Cerebras was trading at a staggering 187 times its trailing twelve-month sales. This multiple stands in stark contrast to its peers: Nvidia trades at approximately 26 times sales, AMD at about 21 times, and Broadcom at roughly 33 times. This significant premium suggests that the market is pricing in an extraordinary level of future growth.

“So, really, if you buy this stock up here, you’re betting on the idea that Cerebras will have much better growth for many years in the future,” Cramer elaborated. “Honestly, at this valuation, you’re basically expecting revenue to be several multiples of what it is right now in a fairly short period of time. Maybe that’s possible, given the company’s impressive technology, but that seems like a real leap of faith to me.”