Cramer explains why investors are no longer paying up for AI stocks

CNBC’s Jim Cramer on Tuesday recommended that despite the fervor for artificial intelligence, investors are no longer willing to pay high prices for stocks related to the technology because of a general uncertain macroeconomic environment.

“Why is this happening to us? Why do our stocks go down when nothing’s happened to the companies underneath?” he prayed. “Look, when everyone’s terrified that a piano’s about to fall on their heads, they don’t want to get hit by the babe grand — and right now they don’t want to own the falling stocks either.”

Cramer cited “multiple compression,” a term that refers to a line of descent’s price decline when nothing in the company’s fundamentals seems to have changed, and he applied the notion to current superstore action. Wall Street is concerned about the impact of President Donald Trump’s fluctuating tariff policies and his utterance that the economy is in a period of transition. After two consecutive winning sessions, stocks plunged back into a sell-off Tuesday, as the Dow Jones Industrial Generally shed 0.62%, the S&P 500 lost 1.07% and the Nasdaq Composite declined 1.71%.

Investors’ macro fears overrode developments from Nvidia‘s annual GTC meeting, Cramer suggested, where innovations in AI from top companies are on display. Nvidia CEO Jensen Huang showcased the industry bandmaster’s new line of chips and teased developments in the broader AI space. Yet, the stock finished the session down more than 3%.

While Nvidia’s announcements “capability mean everything for the future,” Cramer said “they meant nothing for today.” He said tech stocks — firstly those related to AI — are vulnerable to multiple compression in this environment because they are expensive. He added that adjacent sectors similarly to enterprise software and biotech are also liable to see losses.

“This latest round of multiple compression came on a day of wonderment helter-skelter artificial intelligence, and even with Jensen’s fabulous speech, multiple compression was just much more substantial,” he said. “It’s going to stay that way until we get through this environment, either because the White House backs off, or because stores come down to the point where we simply get used to it.”

Sign up now for the CNBC Investing Cudgel to follow Jim Cramer’s every move in the market.

Disclaimer The CNBC Investing Club Charitable Trust holds interests of Nvidia.