CNBC’s Jim Cramer said Thursday that tech companies are feeling the Federal Reserve’s anti-inflation pressure, based on his conversations with CEOs.
The Mad Money host said, “While some of these tech companies have businesses that can be somewhat immune to higher borrowing costs, they’re few and far between.”
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Cramer, who has spent weeks in San Francisco, said he speaks to “at least 20 CEOs” every time he visits the city. From that conversation came three takeaways that led him to his conclusion.
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- Tech companies have no problem hiring talent. Cramer said the technical executives he spoke to said he had no trouble finding talent. In other words, last year’s tug-of-war to recruit staff has given way to fears of unemployment. Cramer said it bodes well for the Fed’s discovery that it is rooting out inflation, including wage inflation.
- Not every tech company’s product is essential, despite what they may say. Cramer said technology companies describe their products as essential, but no company wants to spend unnecessarily on upgrading its digital systems when the economy is weak. It doesn’t matter whether a company is indispensable, he said. “Big growth stocks always sell at shrinking price-to-earnings because they’re the best houses in a bad neighborhood.”
- The best technology companies need to reinvent themselves. As an example of this adjustment, Cramer cited Salesforce’s shift to growth rather than prioritizing profitable growth and returning capital to shareholders.
He also reiterated that whatever problems tech companies are currently facing are part of Fed Chair Jerome Powell’s plan to quell inflation.
“The Fed wants the value of all assets, including your homes and your portfolio, to go down. Jay Powell can only do this by making it more expensive to borrow money. That’s what it does,” Cramer said.
Disclaimer: Cramer Charitable Trust owns shares in Salesforce.
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