Cramer Warns Diversified Portfolios Risk Becoming AI-Overconcentrated

Jim Cramer recently called out the growing trend of AI-related investments making even diversified portfolios more concentrated. On his show Mad Money, a viewer named Jeff asked about the diversification of his top five holdings: Alphabet, NVIDIA, Apple, Caterpillar, and Eli Lilly.

Cramer analyzed Jeff's portfolio and discovered that four out of the five positions have significant exposure to AI or tech investments, making it less diversified than it appears. He pointed out that Caterpillar, which he used to consider a pure late-cycle machinery play, has shifted towards data center demand for large reciprocating engines and turbines.

Caterpillar's Power Generation segment saw a 29% increase in revenue due to growing demand from data centers. The company's backlog expanded $9 billion sequentially to $72 billion, with some customers placing orders as far out as 2030.

Cramer recommended adding TJX Companies and Wells Fargo to the portfolio to balance it out and reduce concentration. He noted that these companies have different demand drivers and can help offset the AI-related exposure in the existing holdings.