Wall Street speculative tech high valuation Jim Cramer
CNBC’s Jim Cramer partially attributed Tuesday’s market-wide decline to that, arguing that Wall Street is too focused on the high valuations of certain technology and speculative stocks. palantirDespite strong profit results, it lost nearly 8%.
“The biggest problem right now is when money managers are asked if the market is too expensive, they immediately think of high-flying speculative stocks or stocks in the high-growth AI column, so they warn you to stay away from the entire asset class,” he said. “These guys aren’t thinking about the other 334 stocks in the S&P 500 that are selling for less than 23 times earnings; those aren’t hyperbole.”
Declines in Palantir and other artificial intelligence companies helped push shares lower on Tuesday. S&P 500 1.17% loss, the Dow Jones Industrial Average 0.53% down and tech-heavy Nasdaq Composite It fell by 2.04%. Palantir was able to beat forecasts and provide solid guidance, citing growth in its AI business. But investors are generally concerned about the huge valuations of tech giants that are pushing the market to new heights.
Investors who see Palantir as their “north star” are alarmed by the big setback after a big quarter, according to Cramer. These fears triggered “a series of sell-offs” as investors questioned the market as a whole, he said.
Suggesting that Palantir may be a difficult stock to classify, Cramer said it is in two different market segments, one centered on technology and artificial intelligence and the other focused on speculative stocks. He noted that the data-driven software company is so lucrative and growing fast that it “defies easy definition.” He listed a number of lines of work, including his work as a defense contractor and consulting for companies looking to modernize and increase profitability.
According to Cramer, it’s reasonable to think there’s nothing wrong with Palantir and that it just needs to “calm down to get to market capitalization.”
“Of course, there are some stocks that are actually demonstrably overvalued, and when you break them down, most of those valuations can be justified, some of them can’t,” he said. “I think the Magnificent Seven can be justified given the growth rate they have ahead of them. Ultimately, the same goes for Palantir.”
