Here’s why Jim Cramer thinks chip stocks can go higher

As Micron shares soared 7.76% on Friday, CNBC’s Jim Cramer explained why he thinks some chip stocks still have room to run.

“Can these stocks keep going higher, though?” Cramer asked. “The answer is yes, in large part because we don’t have enough equipment to expand production of these chips, and we can’t put it together fast enough.”

Micron makes memory and storage technology for artificial intelligence. CEO Sanjay Mehrotra told Cramer that his company is seeing huge demand for its products, and detailed its plans to spend $200 billion to build more domestic production capacity. On Friday, the company broke ground at its 600,000-foot facility in upstate New York.

″AI driven-demand is accelerating,” Mehrotra told Cramer on CNBC’s “Squawk on the Street” Friday morning. “It is real. It is here, and we need more and more memory to address that demand.”

Cramer noted that the fab’s construction was made possible by the CHIPS act — a Biden era initiative that provided huge subsidies for domestic semiconductor manufacturing. The plant won’t address the chip shortage immediately, he suggested, as it could take years to build. Unless demand becomes weaker, Cramer said he predicts prices for these products will keep going higher.

Along with Micron, Cramer named a number of similar stocks that have already seen huge gains this year, including Western Digital, Seagate and Sandisk.

Cramer suggested the shortage of certain semiconductors for the data center wasn’t easy to predict, saying a year ago it seemed there was a glut in the technology. He indicated that Nvidia was the primary semiconductor name to foresee such high demand.

“Only Nvidia really saw it coming. They teamed up with the best of the best, Taiwan Semiconductor, to make all the high-end chips that are needed,” Cramer said. “There’s no bottleneck there. There’s no shortage, at least not in comparison to memory.”

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Disclaimer The CNBC Investing Club Charitable Trust owns shares of Nvidia.