After months of AI infrastructure stocks leading the market, Cramer said investors who maintained exposure to other sectors are finally seeing the benefits of diversification. On Thursday, Kimberly-Clark gained 4.7%, Waste Management climbed 3.9% and Eli Lilly advanced 3.6%. For the week, all three stocks are up at least 6%. The iShares Semiconductor ETF (SOXX), meanwhile, posted its eighth-straight day of declines, its longest losing streak in more than a decade.
“We don’t talk enough about diversification, in part because it’s no fun when one group keeps outperforming the rest of the market,” the “Mad Money” host said. “But when that group crashed to earth over the last few weeks, only diversification could save your portfolio.”
Cramer pointed to the CNBC Investing Club’s Charitable Trust as an example. On Sept. 1, the portfolio exited its position in AI beneficiary Corning, then a day later bought Huggies parent Kimberly-Clark to reduce its exposure to the data center trade. The move initially looked premature as Corning continued climbing and Kimberly-Clark declined, but the recent rotation has begun to vindicate that decision.
“Corning’s rolling over while Kimberly-Clark’s taking off,” Cramer said. Corning shares have fallen almost 5% since the Club’s exit. The Club has added to Kimberly-Clark on multiple occasions to reduce its cost basis and is sitting on an unrealized loss of less than 1%. Shares have gained more than 10% from its Oct. 1 low.
Cramer acknowledged that it’s unclear how long the rotation away from AI will last. But he warned that investors who become too concentrated in one sector risk losses that could drive them out of the market altogether.
“If you’re too concentrated, you’ll get blown out, possibly giving up on the entire asset class,” he said.
Cramer’s Charitable Trust owns shares of INTC, KMB, LLY, NVDA.
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