CNBC’s Jim Cramer said “supply constraints” are two of the most important words he’s heard so far this earnings season, and explained why this situation is good for companies.
“When supply is limited, you can raise prices. That’s the holy grail in any industry,” he said.
intel‘s strong performance was partly due to more demand than supply, Kramer suggested. He noted that the company’s chief financial officer, David Zinsner, said the company’s semiconductor maker is experiencing supply constraints for many of its products, creating “significant supply constraints for the industry.”
Along with Intel, other similarly supply constrained technology names that are doing well in the market include: micron, AMD and Nvidiacontinued Kramer.
Kramer said these companies don’t have enough products, in part because the demand for artificial intelligence storage is incredibly high. He added that he believes demand exceeded supply because semiconductor capital equipment companies simply didn’t expect such an order volume and didn’t manufacture enough machines themselves.
Outside of technology, Kramer said he thinks it’s an airplane manufacturer. boeing and energy companies GE Vernova The company also has supply constraints and will likely say it is short on most planes when it reports its results next week, he added. GE Vernova, he continued, is constrained by the supply of power equipment such as turbines that burn natural gas, the primary energy source for growing data centers.
GE Vernova and Boeing are also likely to be winners because they make big-ticket items that other countries can buy from the U.S. to close trade deficits, Kramer added.
“At the end of the day, demand outstrips supply in many industries, and that’s the ticket to strong stock prices,” he said. “I don’t see that changing anytime soon.”
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