CNBC’s Jim Cramer said Tuesday that technology stocks are losing many of the qualities that have made them the market’s dominant leader group for the past three years.
“True bull markets have leaders, and those leaders have great characteristics,” the “Mad Money” host said. “They’re making huge profits, but they’re limited in number and they don’t have a lot of stock because these companies are constantly buying back stock.”
Tech stocks led the market rally in the wake of the 2023 mini-banking crisis. According to Kramer, Magnificent Sevensemiconductor companies, and enterprise software companies generated huge cash flows, maintained fortress-like balance sheets, and consistently reduced their stock counts through aggressive share buybacks. This combination of financial strength and limited equity supply has helped drive sector leadership and support higher valuations, he said.
But Kramer insisted that things are changing.
“There is no longer a technology shortage,” he said.
The main reason for this is the growing wave of artificial intelligence-related fundraising efforts. Kramer points to upcoming offerings from companies like SpaceX, Anthropic and OpenAI, which he believes could flood the market with new supply and absorb investor money that previously flowed into publicly traded technology stocks.
“Nothing can kill a bull market like an oversupply of inventory,” Cramer said. “The supply will soon come out of your ears.”
This change is not limited to initial public offerings (IPOs). Cramer noted that many technology giants that were once known for their healthy balance sheets and large stock buyback programs are now spending heavily to fund AI infrastructure. alphabet After years of aggressive stock buybacks, Cramer suggested that the company recently raised $80 billion through an initial public offering. Amazon, Metaand microsoft As data center costs continue to rise, companies may eventually have to make similar decisions.
“Oversupply. Balance sheet in tatters. Gunner shareholders. No scarcity value,” he said. “It’s the exact opposite of when Mag Seven was anointed.”
The shift in power dynamics has made Mr. Kramer more cautious about stocks.
“We’re very concerned about this large supply of inventory. The only cure for oversupply is to drive prices down so much that companies don’t want to sell any more inventory,” he said. “We’re not there yet. We’re only in the second day of the oversupply period. But there’s not much that can be done until these deals pass the python.”
