Cramer: Tesla investors are 'playing with fire'

Cramer: How Tesla can justify these prices
Cramer: How Tesla can justify these prices

Electric car maker Tesla Motors needs to "smash" the U.S. electrical grid to justify trading at its currently soaring prices, CNBC's Jim Cramer said Thursday.

"The people that are buying these stocks, just know you are playing with fire," Cramer said on "Squawk on the Street." "I totally understand. Everyone likes to make money overnight. Just understand you're playing with fire."

Tesla shares hit an all-time high Wednesday, the day the carmaker announced plans to raise $1.6 billion in convertible bonds to help fund construction of a "Gigafactory" in one of four states, part of a $4 billion to $5 billion project to revamp its lithium-ion battery production. The company wants to have the factory operational by 2020, when it could produce 500,000 cars. Cramer called that number "eye-opening," but said the company's current share prices are based on "hope."

(Read more: Tesla to Texas: How do you like us now?)

Also this week, Consumer Reports' annual auto issue ranked Tesla's Model S its top overall pick.

(Read more: Tesla soars,Ford falls in Consumer Reports study)

Investment in Tesla translates into belief that its founder, Elon Musk, can "smash the electronic grid" with his battery technology, Cramer said, adding that he would not buy into that option.

Cramer: Tesla is a cult stock
Cramer: Tesla is a cult stock

"I would not take the option because there are too many fabulous companies that are doing really well and that are dramatically lower in price and aren't as based on hope," Cramer said earlier on "Squawk Box." "This is a press-release company right now."

(Read more: Tesla target jump reminiscent of dotcom bubble?)

Tesla shares exploded this week after Morgan Stanley doubled its price target on the luxury automaker's stock to $320 from $153. Cramer said when companies make big convertible note offerings, normally investors short the company's common stock while buying up its bonds. He's not seeing that kind of pressure here. That's because Tesla appears to be a "charmed" stock.

Still, Cramer did not play down the potential of Musk's ambitions.

"He's splitting the atom," Cramer said. "Let's use that as an equivalent—nuclear power. He's [Robert] Oppenheimer, and not just the brokerage firm."

Disclosure: Cramer's charitable trust does not own shares of Tesla.

—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street."