CNBC’s Jim Cramer on Thursday said that based on his conversations with CEOs, tech companies are feeling the Federal Reserve’s push against inflation.
“While some of these tech companies have business lines that may be somewhat immunized against higher borrowing costs, they are few and far between out here,” the “Mad Money” host said.
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Cramer, who has spent the week in San Francisco, said he speaks to “at least 20 CEOs” every time he visits the city. From his conversations this time around, he came away with three takeaways that led him to his conclusion.
Here they are:
- Tech companies are having no trouble hiring talent. Cramer said that the tech executives he spoke to said they haven’t had trouble finding talent. In other words, last year’s tug of war for recruiting employees has been replaced by a fear of joblessness. Cramer said that this bodes well for the Fed’s quest to stamp out inflation, including wage inflation.
- Not every tech company’s product is indispensable, despite what they might say. While tech firms tout their products as must-haves, no company wants to spend tons of cash on an ultimately unnecessarily upgrade to their digital systems during a bad economy, Cramer said. At the same time, it doesn’t matter if a company is indispensable, he added. “Fantastic growth stocks sell at ever-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 noted Salesforce‘s shift to prioritizing profitable growth and returning capital to shareholders instead of growth as an example of this adjustment.
He also reiterated that all the issues tech companies currently face are part of Fed Chair Jerome Powell’s plan to cool down inflation.
“The Fed wants the price of all assets down, including your homes and your portfolios. 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.