CNBC’s Jim Cramer on Monday said tech companies dominate the market because their primary customers are cash-rich businesses, not strapped consumers.
“We have a market made of companies that sell into the enterprise and those stocks are doing fabulously,” he said. “Then we have even more companies who serve the consumer, which is a much less attractive customer base right now, and their stocks, they’re very tough to own.”
A lot of businesses are reporting record profits and were able to refinance when rates were low, Cramer said, and they’re not burdened with as many inflated costs as consumers.
Cramer used this logic to explain why many in the Magnificent Seven — Amazon, Apple, Alphabet, Meta, Nvidia, Microsoft and Tesla — are seeing such significant gains. Microsoft primarily sells its products to businesses, while individuals are “small potatoes” to the company. Although consumers use their products, Alphabet, Meta and Amazon’s real customers are advertisers.
But Cramer conceded that Apple and Tesla differ slightly from the pack. Tesla’s disappointing earnings and slower growth forecast reflect a consumer base that can’t afford its products. Similarly, Apple has little enterprise exposure, making its business vulnerable to consumer spending habits.
“I don’t worry about the concentration of winners in tech because, alas, the concentration makes sense,” Cramer said. “And it does so in a really bullish way.”
