Cramer says fears of artificial intelligence added to the market sell-off

  • “Mad Money” host Jim Cramer determines the causes of the sell-off, zooming in on scandals at Facebook and Uber.
  • Cramer argues that people are growing wary of artificial intelligence.

After the Dow Jones industrial average’s 700-point plunge on Thursday, CNBC’s Jim Cramer knew he had to determine the causes of the sell-off for investors.

The main issue seemed to be President Donald Trump’s newly announced tariffs on Chinese goods, which spooked companies that do business in the People’s Republic.

While the “Mad Money” host was relieved that the tariffs only targeted China and not other U.S. trading partners, he acknowledged the chief worry among investors.

“The problem is we don’t know where the Chinese are going to hit back,” he said Thursday, noting the broad spectrum of consumer- and business-facing companies operating in China.

One potential target could be the technology sector, which accounts for 26 percent of the S&P 500, Cramer said. Chinese consumers buy a lot of U.S. technology, including but not limited to Apple products.

“Every tech company in the world … covets China, the market, so the fears of number cuts are way too palpable for anyone to step up to the plate and buy today,” Cramer said. “And China’s not like the U.S.; their system has few checks and balances. If President Xi wants to outright ban the sale of iPhones, he can do it.”

But tariffs aren’t the only problem plaguing the tech sector at the moment. Facebook executives have been making the rounds on television to apologize for a data scandal involving Cambridge Analytica, a firm that reportedly harvested data from 50 million Facebook users without their permission.

As a result, “people are becoming disenchanted with tech, particularly something they loved until recently, … artificial intelligence,” Cramer said. “What Facebook did was basically allow bad guys to data mine and make judgments about people using artificial intelligence.”

That sentiment was made worse by news of a fatal accident in which an Uber-operated self-driving car hit and killed a pedestrian in Tempe, Arizona, the “Mad Money” host argued.

“Countless tech companies are trying to get a piece of the autonomous driving market — it’s a huge opportunity,” he said. “But the roadside fatality we got earlier this week has slammed the brakes on the whole industry. There’s going to be a lot of missed quarters here because of that accident.”

As people start to grow wary about sharing their information with big corporations, Cramer predicted continued weakness for companies on the front lines of consumer-facing big data and artificial intelligence.

“When you have Facebook saying, ‘Please regulate me,’ people start to worry about these things,” the “Mad Money” host said. “The bottom line? In the end, if you give us nothing to buy, we will sell. The controversies are finally coming home to roost and the sellers … are coming right along with them. And that’s how you get a hideous day like today.”

WATCH: Cramer lists the causes of the sell-off

Disclosure: Cramer’s charitable trust owns shares of Apple and Facebook.

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