Jim Cramer reveals the secret to finding a winning tech stock in this market
CNBC’s Jim Cramer said the bar has shifted for tech stocks, and simply growing earnings is no longer enough to sustain a rally.
“When it comes to tech companies, it’s no longer enough to just beat and elevate,” the “Mad Money” host said. “You need a scarcity, or your shares won’t get much love even if you’re one of the big dogs reporting after tonight’s close.”
On Wednesday, four mega-major tech companies — Alphabet, Amazon, MetaAnd Microsoft – reported that two in four people experienced a decline in after-hours transactions. This mixed response points to a market that increasingly rewards scarcity, Cramer said.
“It’s weird,” he said. “There was a time when all four of these companies had unstoppable growth. Now the growth is in the hands of those selling into limited areas.”
Key cited Meta as an example. The company posted its fastest revenue growth in five years, but shares still fell in extended trading as investors questioned the returns on increased spending.
The difference was stark compared to companies that benefited from supply constraints earlier in the week.
Seagate It rebounded after signaling a supply shortage in data storage hardware due to data center demand. “They can’t produce their products fast enough,” Cramer said, pointing to limited production capacity.
Blooming EnergyPower systems, which Cramer calls one of his “favorites,” are also on the rise, and Cramer noted that the power systems increasingly used for data centers are in short supply. While not a traditional technology name, Bloom has become an important part of the broader AI business as demand for energy infrastructure connected to data centers continues to grow.
NXP Semiconductors jumped due to an unexpected shortage of automotive chips; This was a reversal for a segment that had previously been left behind. “NXP is a necessity as cars are now full of software-defined products,” Cramer said.
This shift underscores that investors are turning to companies with limited supply and apparent demand, even if they don’t have the scale of megacap technology.
“The bottom line is it’s simple,” Cramer said. “The best technology these days is, ironically, old technology because we stopped making it and it became fashionable again.”
