CNBC’s Jim Cramer said Wednesday that rising borrowing costs are splitting the stock market into two camps: companies constrained by the bond market and artificial intelligence businesses that appear largely insulated from rising interest rates.
The “Mad Money” host said Wednesday’s 10-year Treasury auction reminded him of the days of hedge funds, when investors waited for the results of bond sales before buying stocks.
Wednesday’s $39 billion auction drew strong demand and helped lower U.S. Treasury yields from multi-decade highs earlier in the day. Still, stocks ended the day lower as investors spooked by the benchmark. 10 year yield Kramer said the market’s renewed focus on bond auctions highlights how important borrowing costs are for equities.
“A market that has to wait for the outcome of a bond auction is not as good as a market that doesn’t care about the outcome,” Cramer said. “Every time you add a new variable to the equation, it becomes harder to own the stock.”
Rising interest rates could have ripple effects throughout the economy. Kramer cited financial, housing, utilities, entertainment, retail, automotive and industrial as sectors where businesses and their customers rely heavily on credit. But he said AI companies seem to be playing by different rules. Data center builders, semiconductor companies, power companies and cybersecurity companies are less constrained because financial institutions remain eager to fund growth, Cramer said. And it also explains why the stock market has been so narrow lately, with AI stocks pushing the S&P 500 back to record highs this week.
“They seem to be able to rent it whenever they want,” Kramer said. “They are crowding out other borrowers with their demands for money.”
space x is an example. Elon Musk’s rocket and AI company seeks to borrow $40 billion for acquisition, Financial Times reports Nvidia As it already does, it will sell chips for data centers and the resulting computing power. of the alphabet Google and human. Despite SpaceX’s BBB credit rating and potential borrowings, Cramer expects it will be able to secure relatively attractive terms because of its enthusiasm for AI.
“If it’s a non-data center company, that (borrowing) interest rate will skyrocket,” Cramer said. “It’s not a data center, though.”
he contrasted it with the newly named sky dancerecently issued a similar amount of debt as part of its acquisition of Warner Bros. Discovery. Bonds fell sharply as investors weighed challenges facing the economically sensitive film and television business, including cord-cutting and advertising pressure.
This contrast emphasizes Kramer’s larger point. Traditional companies remain vulnerable to rising borrowing costs, while AI companies largely avoid similar credit concerns. This dichotomy is also reflected in the stock market, with Kramer calling AI stocks “saintly” names.
“Aside from maybe Oracle, AI data center stocks have nothing to do with what price the federal government will borrow,” Cramer said. “They’re just about a future that’s supposed to be bright enough to make any problem, every bump, even every pimple out of sight. The rest of corporate America should be very lucky.”
