CNBC’s Jim Cramer said Thursday that based on his conversations with CEOs, tech companies are feeling pressure from the Federal Reserve against inflation.
“While there are some business lines among these technology companies that may be somewhat resistant to higher borrowing costs, they are few and far between,” the “Mad Money” host said.
Cramer, who spent the week in San Francisco, said he talks to “at least 20 CEOs” every time he’s in town. From his conversation this time, he came up with three takeaways that led him to his conclusion.
Here they are:
- Tech companies are having no trouble recruiting talent. Cramer said the tech executives he spoke with didn’t have trouble finding talent. In other words, last year’s drag on hiring has been replaced by unemployment fears. Cramer said that bodes well for the Fed’s quest to stop inflation, including wage inflation.
- Despite what they may say, not every technology company’s product is essential. While tech companies tout their products as essential, no company wants to spend a lot of cash on an ultimately unnecessary upgrade to their digital systems during a bad economy, Cramer said. At the same time, it doesn’t matter whether a company is essential or not, he adds. “Fantastic growth stocks sell at shrinking price-to-earnings multiples because they’re the best houses in bad neighborhoods.”
- The best tech companies have to reinvent themselves on the fly. Cramer cited Salesforce’s shift to prioritizing profitable growth and returning capital to shareholders as an example of this synergy.
He reiterated that the problems tech companies are currently facing are part of Fed Chair Jerome Powell’s plan to reduce inflation.
“The Fed wants to lower the price of all assets, including your home and your portfolio. Jay Powell can only do that by making it more expensive to borrow money. That’s exactly what he’s doing,” Cramer said.
Disclaimer: Cramer’s Charitable Trust owns shares of Salesforce.