Jim Cramer names 4 'indispensable' memory stocks he says investors 'can't afford' to skip as AI demand soars

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AI is making memory stocks soar (1). Jim Cramer of Mad Money says you should buy high.

"I say that you have to free yourself of these constraints and understand that sometimes, it really is different," said Cramer on a recent Mad Money segment (2). "Sometimes, the opportunity is too great and you can't afford not to take it."

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Cramer says that four memory chip makers are "indispensable" right now: Seagate, Western Digital, Micron and Sandisk.

"Musk is right: Memory has become the bottleneck," says Cramer, likely referring to Musk's recent statements on SpaceX's Q2 earnings call (3). "And these four companies — well, you know what? It's pretty good if it stays that way."

But will it stay that way? And is it worth buying high if there's a chance these companies' stocks will climb even higher as new data centers are being built?

Cramer says the memory chip market is usually cyclical — but data centers are changing that, for now

Cramer is first to admit that he's not early to memory chip stock. That matters, because memory stocks are known to cyclically boom and bust (4).

Memory chips have huge upfront costs; because of that, once a company starts printing memory chips, it's generally worth it to keep going until memory prices are very low (5). This means that memory tends to ping between too much supply and too much demand and memory manufacturers' stock prices reflect what part of the cycle memory is currently in.

The question, then, is whether AI has broken that cycle.

Data centers, which require computer memory to work, are being built at unprecedented rates (6). If combined data center and consumer demand for chips eclipse memory companies' ability to create memory chips, then memory stock could continue to climb past when it would normally crater.

Still, this can't last forever. Eventually, companies will slow down on data center construction and memory chip supply will once again eclipse demand. Memory companies' stock success depends on how long data centers can give them a boost.