CNBC's Jim Cramer said that investors need to become far more selective in the semiconductor rally.
Cerebras, a chipmaker focused on artificial intelligence workloads, completed the largest IPO of the year Thursday. The stock priced at $185 Wednesday night but opened around $350, briefly valuing the company at roughly $107 billion. It ended the day at $311 a share, good for a roughly $95 billion market cap.
"There's a word for that: that word is fanciful," the "Mad Money" host said, referring to Cerebras' blockbuster debut. "Today's action was right out of 1999."
For Cramer, the move reflected a broader rush into anything tied to artificial intelligence — a trend he still strongly supports, but one he believes now requires greater discipline from investors.
"I've been in favor of this semiconductor rally the whole way," he said. "The fourth industrial revolution that Nvidia CEO Jensen Huang promotes, hook, line and sinker."
He pointed to Cisco as one name he feels comfortable owning after the company posted what he called an "extraordinary performance," including accelerating sales and earnings tied to AI infrastructure spending. Cisco makes networking chips used to send data throughout data centers.
"This time Cisco deserved the run," Cramer said. "Today's 13% rally was completely justified and then some."
Cramer also highlighted Nvidia, arguing the stock remains attractively valued despite its massive gains.
"There's a very good chance that, based on forward earnings estimates, Nvidia's stock is now cheaper than the average stock in the S&P 500," he said. "That's absurd."
He added that memory and storage names like Micron, Sandisk and Western Digital also remain reasonable stocks to own, as long as supply shortages persist and demand for AI computing remains strong.
"I don't mind stocks that go up huge on shortages," he said.
The bottom line? Cramer said investors should not abandon chip stocks, but they should be much more discerning about which names they buy as enthusiasm around AI intensifies.
"Please, please exercise discipline," he said. "Understand what these companies do and why they aren't worth this."
Sign up now for the CNBC Investing Club to follow Jim Cramer's every move in the market.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram
Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com
