We recently compiled a list Jim Cramer’s Bearish Calls: 10 Tech Stocks on the Road to Crash.In this article, we will look at where Micron Technology Inc. (NASDAQ:MU) stacks up against other tech stocks.
For Jim Cramer, tech stocks and the Federal Reserve’s interest rate cuts are the main talking points. Investors continued to face an uncertain macroeconomic picture complicated by the “bullish dove” of the Fed which cut interest rates by 25 basis points but also hinted at fewer rate cuts in 2025 than expected. On the day the Fed announced the rate cut, the benchmark S&P index sank 2.95%, and more speculative investments, such as Bitcoin, fell a sharper 8.6%.
However, as was the case with the macroeconomic picture, the sell-off seemed a little too much. Two days later, on Friday, the Commerce Department released the all-important personal consumption expenditures (PCE) data set. PCE is the Fed’s preferred inflation reading and found that annual inflation was 2.4% in November. This reading was less than 0.1 percentage point from economists’ expectations. As a result, it signaled to investors that the Fed might take it easy on interest rates heading into 2025.
Slightly improved expectations sent the S&P up 1.86% on the day of the PCE data release. Cramer was also upbeat, saying the data was “somewhat encouraging. Because if we do get lower inflation, I think that’s certainly a possibility because we’re starting to get to grips with what’s really causing inflation. Then it doesn’t seem so devastating, what happened on Wednesday.”
However, he added that the release of bullish data does not mean markets will reverse all their losses from Wednesday. Despite the fact that inflation was lower, the S&P index is still down 1.83% since the data was released. Cramer shared insight into the reasons for the weakness. According to him, the market has speculated a lot in areas such as quantum computing and Bitcoin. The CNBC host noted that “intense Bitcoin speculation, after nuclear speculation, after quantum computing speculation” fueled the market’s performance ahead of the rate announcement. Consequently, because these areas lack fundamentals, investors may not have immediately returned to them.
His Squawk on the Street appearance the day after the rate cut was also full of pessimism for quantum computing stocks. These stocks have risen by as much as 162% in the past month – a development that, at first glance, would indicate a revolutionary shift in their outlook. However, these developments are primarily driven by Google’s Willow quantum computing chip. The hype around quantum computing is understandable as Willow claims to solve a problem that would take a traditional supercomputer 10 septillion years to solve in less than five minutes.
However, Cramer remains unconvinced about this technology niche. Commenting on the stocks that are ranked 16 on this list of stocks he was talking about, the presenter wondered what led to his 162% returns. Comparing quantum computing stocks to non-fungible tokens, Cramer commented:
“How are these companies, how is D-Wave Quantum by the way, how is it going to be in quantum? When we don’t even know what quantum is? Those are non-fungible tokens, right? Because you know what a fungible token was?”
As for the Fed, he believes the central bank’s data-dependent strategies have backfired against the bullish rate outlook because they “chose not to be data-dependent.” In an episode of Mad Money that aired on the day of the interest rate cut, he speculated that Fed Chairman Jerome Powell appeared to be “caught up in having to meet a prediction of the need to cut interest rates, and that need was no longer apparent. The data didn’t back it up.” Cramer added that he believes “it would have been much better if they had specifically taken a wait-and-see approach before this meeting. They telegraphed the wrong thing this time. Hence today’s breakdown.”
The next day, Cramer added that the Fed might be better off ahead of the call because it hasn’t signaled it will cut rates. However, as he did the opposite, he was locked into cutting rates while data pointed to a robust economy that may not have needed lower interest rates. “I think it confused people. It confused people because they lowered rates and then gave exactly what I would call [inaudible] because he didn’t cut rates,” Cramer shared, adding that the Fed is “trapped, Jay is trapped.”
For 2025, Cramer wants investors to focus on stocks that could change the world. On a recent episode of Mad Money, he pointed out that some stocks tend to buck the tide because of a fiercely loyal following. Sharing some advice, Cramer stated:
“The lesson here is a brutal one. Sometimes conventional valuation methods are completely worthless and you have to accept the dynamics of cult stocks. The trick is to recognize when we are in one of those moments. In 2025, let’s seek to find stocks of companies that defy orthodoxy.”
Our methodology
To create our list of bearish calls on Jim Cramer’s tech stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street back in August. We then selected the stocks he was bearish on, analyzed their performance, and ranked them by the number of hedge funds that bought the stock in Q3 2024.
For these stocks, we also listed the number of hedge fund investors. Why are we interested in hedge fund stocks? The reason is simple: our research has shown that we can beat the market by mimicking the best stocks of the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Analyst: Micron ( MU ) Technology Issues ‘Very Temporary’
A close-up view of a computer motherboard with integrated semiconductor chips.
Number of hedge fund owners in the third quarter of 2024: 107
Date of Cramer’s comments: 08/22/24
Performance since then: -14.37%
Micron Technology Inc. (NASDAQ:MU) is one of the three largest manufacturers of memory chips in the world. It is also the only American company of its kind. Consequently, the semiconductor company enjoys broad exposure to the AI industry as its HBM3e products are among the few that can be used in AI GPUs. However, the scale of Micron Technology Inc. (NASDAQ:MU) also means that the broader non-AI consumer and enterprise computing market needs to perform for its stock to do well. The stock is up a modest 8.4% since the start of the year, as it has been particularly hurt by the slowdown in the PC market. Back in August, Cramer predicted that shares of Micron Technology Inc. (NASDAQ:MU) could fall to $98:
“So Micron Technology (MU) experienced a sharp decline, but after the company announced its buyback program, the stock stabilized around $92 before recovering. They recently came back and I think they might drop to around $98 or $99. at that point, I would consider buying more.”
Overall MU ranks 3 among the tech stocks that Jim Cramer talked about recently. While we acknowledge the potential of MU as an investment, our belief lies in the belief that some AI stocks promise higher returns in a shorter timeframe. If you’re looking for AI stocks that are more promising than MU but trade at less than 5 times earnings, check out our report on cheapest AI stocks.
READ THE FOLLOWING: The 8 Best Wide Moat Stocks You Can Buy Right Now andThe 30 most important AI stocks according to BlackRock.
Disclosure: None. This article was originally published on Insider Monkey.
