Jim Cramer isn't giving up on semiconductor stocks despite the sell off. Here's why

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Mad Money

Published Tue, Oct 13 20266:19 PM EDT

Key Points

• CNBC’s Jim Cramer said investors shouldn't give up on semiconductor stocks despite the recent sell-off, arguing that strong demand for chips continues to support the industry's long-term growth.
• Cramer highlighted Micron's long-term customer agreements and the expanding use of CPUs from Intel and AMD as reasons the sector's underlying fundamentals remain strong.

Semiconductor stocks have been getting crushed in recent days, but CNBC's Jim Cramer said Tuesday there's a compelling reason not to give up on the group.

The VanEck Semiconductor ETF has fallen 7.2% over six consecutive sessions, and Cramer warned that rising oil prices and interest rates could prolong the sell off. However, he argued chip stocks are increasingly trading together regardless of their individual fundamentals, obscuring the strong demand that fueled the sector's remarkable rally earlier this year.

To illustrate his point, Cramer described a recent visit to an Apple showroom, where he saw devices featuring a more personalized Siri and advanced smart home technology. The experience highlighted how increasingly sophisticated consumer products require more computing power and memory, creating additional opportunities for chipmakers.

"Before you decide to bail from the semis because you can't take the pain, go to the showroom," the "Mad Money" host said. "Go see where these chips are used. They appear in places that you'd least expect them. Don't watch the semiconductor index, watch the devices."

And the demand story isn't limited to memory chips. Cramer also highlighted Intel and AMD, which "make the CPUs that are basic building blocks for practically every machine under the sun."

"It wasn't all Situational Awareness, the wayward hedge fund that took so many semis up to unsustainable levels with borrowed money," Cramer said. "A lot of this is just raw demand."