Tech stocks feel like the only game in town. Here’s why they are so hard to abandon
So many times when I want to write about something other than technology companies, I get hung up, not just on the size of tech — something my colleague David Faber often reminds me of — but how wonderfully robust tech is versus other corners of the market. Take Meta Platforms . I had been urging Meta to do something big with its growing reservoir of compute power, in order to soothe concerns about its massive spending on artificial intelligence. On the evening of June 30, I said on “Mad Money” that a cloud business announcement would be worth an easy 100 points, or $100 per share, for the stock. Meta closed at $563 on June 30. The next day, Bloomberg News said Meta was working on a business to sell excess compute — a report I later confirmed . Then, on Thursday, we finally heard from CEO Mark Zuckerberg about it, telling Bloomberg in an interview: “The offers that you get for using the compute are so high that it may make sense, in some cases, to rent out or consider those kind of deals instead of your own internal uses.” As the market reacted to those comments, Meta jumped 6% on Friday, bringing the stock to $669. A simple acknowledgement of something that seemed so obvious gave you 100 points over one week’s time . Meta was our top-performing stock last week. META YTD mountain Meta’s year-to-date stock performance. Now compare that with PepsiCo , a company that used to give you consistent, multiyear growth. Its stock had declined to the point that it seemed almost like a lay-up to go higher after it reported earnings Thursday morning . Nope. It crushed you, falling over 3% on Thursday and inching a bit lower in Friday’s session, too. By a simple stroke of a pen, Meta gives you 100 points, or almost 20%. By dint of a weak quarter, Pepsi dives in a way that is not meant to happen for a food and beverage company. The tech companies, especially the trillion-dollar behemoths, just have so much more to offer than any other industry. We know, for example, that in hindsight there was big money to make with SK Hynix , the memory-chip giant that debuted on the Nasdaq on Friday , complementing its shares that trade in its home country of South Korea. With the U.S. listing, SK Hynix raised $26.5 billion to help fund its expansion plans. The stock rose 13% in its first day. Tech is dynamic. In SK Hynix’s case, we have a company propounding a thesis that it’s no longer a cyclical company, it is now a secular grower thanks to memory-intensive AI computing. This thesis — first talked about by memory rival Micron and then by Applied Materials , a key maker of chip-production equipment — should be well known and not actionable. But in tech, each time a company proclaims that it isn’t cyclical, its stock moves. Think of it like this: Lam Research and KLA Corp , which are peers of Applied Materials in the equipment space, and memory chipmakers Seagate , Western Digital and Sandisk simply have to say when they report that they are on allocation but are offering the same long-term deals that Micron and Applied Materials are offering. In response, you are going to get higher price-to-earnings multiples for the stocks and, by extension, another run higher. Seagate, Western Digital and Sandisk already have some long-term supply agreements in place. What we saw with Micron last month was the company touting 16 strategic customer agreements (SCAs), after in March saying it was excited to have signed its first five-year SCA. Point being, the number of these contracts went way up in just a few months. But then consider Solstice Advanced Materials’ acquisition of Element Solutions , a $14.5 billion deal announced last Monday. We had Solstice CEO David Sewell on “Mad Money” and the rationale for this deal is, frankly, brilliant. The company is putting together a potential modern-day materials colossus that, pending closure, would include the key materials needed to make semiconductors — Club name Qnity is a big competitor — and run nuclear power plants . In another time, both stocks would have rallied. That’s how accretive and thoughtful this deal is. Instead, right out of the gate, it looked like a sure loser, with Solstice shares plunging 15% on Monday and finishing the week down over 23% (Element shares fell almost 9% for the week). This is no loser. I want to own Solstice. But we have too many stocks right now. I put it out there, though, as a tremendous combination. Now consider the other possibilities. I don’t know if you saw, but coinciding with SK Hynix’s debut Friday, the stock of Nvidia mounted a nice rally, up 4% on Friday. This was actually a big deal because Nvidia has been trying our patience. I have been a believer that buyers of SK Hynix sold Nvidia’s stock to get into the deal. Why Nvidia? Because it is big and liquid and doing nothing (the stock entered Friday essentially flat since April 22, versus a nearly 35% gain for a basket of semiconductor names ). If you sold a lot of Nvidia to get SK Hynix, you may have gotten a smaller share of the deal than you thought. Unlike, say, us for the Charitable Trust, these investors could just go back and buy Nvidia and not be embarrassed or have to explain the move. I think that nobody else plays with an open hand because it is way too painful; but don’t get me started on that one. So, the buyers moved Nvidia up to $211, its highest close since June 15. Can the stock go materially higher from here? No, I don’t think so. Unless the company does what I have been saying it must do : Expand the size of its stock buyback gigantically and take profits in some of its investments that it has made huge money in. It could take some of that Intel gain and use it to buy some Nvidia — to put a finer point on it, Nvidia last year paid $23.28 a share for a 5% stake in Intel, and based on Friday’s closing price, it’s sitting on a 372% gain. Importantly, Nvidia needs to make the claim that Apple used to make to me when I questioned why they were so aggressive: because there was nothing cheaper than its own stock. It’s not enough to repurchase stock when shown stock, which is how this buyback seems to be run. It needs to walk right behind buyers and stay there. If I were running the buyback, on Monday I would offer to buy a million shares at a bid price of $209. If I didn’t get any, I would leave that bid in and say I would buy a million at $210. If the stock goes higher, Nvidia should walk the buyback up to as close to the bid as it can at 3:50 p.m. ET, the time that the safe harbor to repurchase stock ends. If the stock drops precipitously beginning at, say, 3:55 p.m. ET, I would examine the options volume to see if it is playing a role in knocking back the stock, as I think options are doing. The public has a voracious appetite to buy Nvidia calls. The professionals know this and they love to bang down the calls in the closing minutes of the day. To me this is manipulation. If Nvidia were to go to the Securities and Exchange Commission and ask for a “no action” letter, saying that its buyback would allow for stability in the last hour of trading, I think it would get it. Again, tech has something it can do to change the equation, plain and simple. The crime of it all is that I do not care what company or sector I own. I only care about the number of points that can be gained. If Slim Jim maker Conagra Brands , a $14 stock, could go to $20, I would be all in — that’d be an over 40% gain. If Pfizer , a $24 name, could advance 25% to $30, I would be behind it lock, stock and barrel. But these would be hard-fought, unlikely wins. Consider, on the other hand, if Google parent Alphabet were announce Monday that it will spin off robotaxi subsidiary Waymo into a standalone firm. At this moment, Waymo is so far ahead of Tesla , in terms of trials and actual ridership data, that I believe it could get a ridiculous valuation. Once it did, I think Alphabet’s stock would move up dramatically. It would require nothing. It would show you how undervalued Alphabet really is. Don’t forget about the juggernaut that is YouTube. The flipside to this exercise is Microsoft , which is down almost 30% from its highs last fall. It’s much harder to do. Could Microsoft spin off Xbox? Possibly, but I don’t know who would want it unless it was done contiguous to the long-awaited November launch of the new Grand Theft Auto VI. That’s a huge moment for the video-game industry. Sell LinkedIn? What would that bring in? I just don’t know what value can be created with Microsoft because it has a seat-based enterprise software business that is just big enough to make it so Wall Street’s growth expectations might be hard to meet. Arguably, the only thing it can do is wait for OpenAI to falter and scoop it up. I want so much this week to find a bank stock that could rally 20%. I seized on Capital One , initiating a position last March around $176 a share, ahead of its Discover acquisition closing. But then I was negligent in not taking the gain when we had it, as shares traded up into the $250s in January. The decline from there was brutal. We still hold it because I genuinely believe that this will be the quarter that co-founder and CEO Richard Fairbank reveals the “new” Capital One. I do think Club name Goldman Sachs , which reports Tuesday morning , could have a colossal quarter. But a gigantic quarter might give you a 4% gain. So I stick with the endless tech narrative, occasionally veering off to a healthcare company with some good news, or perhaps a retailer that can have a run, like that of Target , or a drug distributor like Cardinal Health , which shows you it is changing its stripes to help small-to-medium-sized doctor groups . I will keep trying; that’s my job. But after a 10-day period where Meta does the obvious and picks up 100 points and SK Hynix talks about the obvious — the secular, not the cyclical — and you get a monster success, there does seem to be fertile ground to till. (Jim Cramer’s Charitable Trust is long META, COF, CAH, GS, MSFT, GOOGL. See here for a full list of the stocks.) 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