Jim Cramer says the AI trade has shifted

CNBC's Jim Cramer on Tuesday offered up a straightforward framework for Wall Street's current approach to the artificial intelligence trade.

"Wall Street's now rewarding tech companies with products in high demand and punishing their customers," the "Mad Money" host said.

The shift comes as the "Magnificent Seven" collectively shed roughly $2.3 trillion in market value during the month of June as investors questioned whether the group's enormous AI spending will ultimately generate enough earnings and free cash flow to justify their decisions. The Mag 7 consists of Apple, Google parent Alphabet, Amazon, Microsoft, Meta, Nvidia and Tesla.

The biggest spenders on AI data centers in the group are Amazon, Alphabet, Microsoft and Meta. Now, Cramer said these so-called hyperscalers have become victims of their own AI ambitions. The companies have the financial resources to keep pouring billions into AI, Cramer said, but demand for compute infrastructure has outstripped supply, driving up the cost of critical components such as memory chips and networking equipment. That dynamic, Cramer said, has rewarded the companies selling the picks and shovels of the AI boom rather than the companies footing the bill.

"The biggest gainers are the exact opposite of the Magnificent Seven," he said. "They make products that are in short supply, with demand that's off the charts."

Nvidia fits the bill as a key supplier of AI compute, but Cramer said the stock has fallen into the laggard camp due in large part to concerns about custom chip competition.

Cramer pointed to memory chipmakers Micron and Sandisk, along with Intel, Marvell Technology, and AMD, as some of the second quarter's biggest winners. He said the supply-demand imbalance has fueled strong earnings growth and a steady stream of analyst upgrades and price target hikes across the group.

Among the group, Cramer singled out Intel as his new favorite stock. He credited CEO Lip-Bu Tan with revitalizing the chipmaker, and said Intel is well-positioned to benefit from rising demand for CPUs, advanced chip packaging and domestic semiconductor manufacturing. Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, owns Intel shares.

"It's a national treasure," he said.

While Cramer said the Club continues own six of the Mag 7 constituents — Tesla is the exception — he thinks the suppliers will continue to benefit as long as demand for AI infrastructure outpaces supply.

"Some of you may think that's unfair ... but the market has spoken and I don't know if it'll learn another language next quarter, let alone the rest of the year," he said.

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