Cramer Flags AI Winners, Warns STMicro Is 'Late Late Late' At 51x Earnings

Wells Fargo raised Devon Energy's price target from $66 to $68 and kept an Overweight rating, while Jim Cramer reiterated a bullish view on Devon for its natural gas exposure. Cramer also highlighted USA Compression Partners' 52-week high and yield support, and said Taiwan Semiconductor is likely to move higher as it boosts AI-related spending. The article is largely commentary-driven, with the only concrete corporate update being USA Compression Partners' mixed Q1 results on May 5.

Analysis

The clean read-through is not just “energy good, chips good.” It’s that capital is still being allocated toward businesses with visible cash yield and/or structural AI exposure, while visibly expensive secular names are starting to get punished at the margin. DVN’s setup is stronger than a generic gas bet: if gas remains firm into winter, the market will re-rate the balance sheet/cash-return story faster than oil-beta peers, because the incremental upside from gas is less crowded and less hedged than the broader E&P complex.

WFC’s upgrade matters less for the headline target and more because it signals the market is willing to pay for net interest margin resilience again. The second-order effect is that bank valuation support can become self-reinforcing if rates stay higher for longer or long-end yields stop falling; that would favor large-cap lenders over regional banks with deposit fragility. The risk is that a sharp move lower in yields would compress the “quality at a reasonable price” trade in financials almost immediately, so this is a months-long thesis, not a days-long catalyst.

TSM remains the higher-quality way to own AI capex because it monetizes the arms race without taking end-demand risk directly. The likely underappreciated angle is that continued advanced packaging and AI infrastructure spend tightens the supply chain for everyone below TSM, which should keep pricing power elevated into next year even if handset/PC demand stays soft. By contrast, STM at a premium multiple looks like the market is already paying for a recovery that may take longer to show up in earnings, making it vulnerable if industrial semis stay sluggish for another quarter or two.

USAC is the defensive yield leg, but it is not a high-conviction growth winner; it is a bond proxy with operating leverage to compression demand and midstream volumes. In a mildly positive tape, it can outperform on downside capture, but upside is capped unless energy activity accelerates materially. The best contrarian angle here is that the market may be underpricing how long capital will keep favoring cash distributions over multiple expansion in energy-adjacent names.

Key Decisions for Investors

• Long DVN vs. XOP basket for 1-3 months: prefer the gas tilt and cleaner cash-return story; target 8-12% upside with tighter downside if gas weakens faster than oil.
• Add WFC on pullbacks for a 3-6 month hold: buy weakness if 10Y yields stay rangebound; risk/reward is attractive as long as recession odds don’t reprice sharply.
• Maintain or initiate TSM as the core AI semi exposure for 6-12 months: use it as the preferred long over higher-multiple hardware names; upside is steadier, downside less binary than pure AI winners.
• Short STM vs. long TSM as a relative-value pair over the next 1-2 quarters: thesis is multiple compression in STM if earnings don’t accelerate quickly enough to justify valuation.
• Use USAC as a yield-oriented satellite position only if income is the objective; avoid sizing it as a growth trade, since upside likely trails higher-beta energy and AI beneficiaries.