Jim Cramer Compares AI Stock Sell-Off to 1987 Market Crash

Mad Money host Jim Cramer compared the latest slide in artificial intelligence stocks with the 1987 market crash, arguing that broad selling can move share prices away from underlying business conditions.

The Nasdaq Composite fell 4.5% last week, ending a four-week winning streak. The S&P 500 lost nearly 2%, while semiconductor and data center stocks were among the hardest hit. The declines prompted Cramer to question how much of the movement in some AI-linked shares reflected changes at the companies themselves.

Cramer made the comparison Monday, Oct. 19, the 39th anniversary of the 1987 crash. The Dow Jones Industrial Average plunged 22.6% in that session. Portfolio insurance strategies, designed to limit investors’ losses, helped accelerate the fall as declining prices triggered more automatic selling.

The lesson Cramer drew from that episode was that a stock’s price can separate from the condition of its underlying business. Selling in 1987 swept through shares even when the companies behind them remained strong. He sees a possible parallel in parts of the current data center trade, where stocks have fallen together despite no apparent deterioration in company fundamentals.

Some data center stocks are trading with “little to nothing to do with the fundamentals,” Cramer said. He limited that assessment to some of the group, rather than every company tied to AI. His comparison concerns the pressure created when shares move together, not a claim that the recent decline matches the scale of the 1987 crash.

The remarks extend his earlier warning about concentrated AI portfolios, which focused on the losses investors can face when a heavily owned market theme falls out of favor. This time, Cramer focused on how trading itself can amplify a decline and obscure differences among companies.

On Monday, both the S&P 500 and Nasdaq Composite recovered some of their losses from Friday.