CNBC’s Jim Cramer on Monday opined on what is necessary to create a sustainable market rally, saying that the market needs companies with tangible reasons for gains.
“This market needs some new heroes to go higher — at least one, ideally more. Otherwise, we’re going to lapse into that pure multiple expansion thing, which makes the market get more risky than I’d like,” he said. “Doesn’t mean it can’t keep going up, but it does mean the rally from here would be a lot less sustainable, and, yes, a lot more dangerous.”
Cramer first pointed to tech stocks like Nvidia, with the semiconductor company priced much higher than expected this year due to its prominent role in generative artificial intelligence. Cramer said Nvidia’s stock has soared for two reasons: Investors are willing to pay more for the same earnings — known as multiple expansion — and because the company’s earnings turned out better than expected. But to him, the stock is soaring mostly for the latter reason.
“Why should we care? Because, ultimately, we don’t want to pay more and more for the same earnings, right?” Cramer asked. “When that happens, they get more expensive, and they get risky. We want stocks to turn out to be reasonably priced based on higher earnings because that kind of rally is sustainable.”
He then applied the same principle to Microsoft, saying the company’s use of generative AI has also made it popular on Wall Street. He said last year that few investors knew that generative AI would lead to such huge increases in earnings. Cramer added that Microsoft’s gains are based on tangible potential and higher earnings, not just “love” for the company that would lead to fleeting stock success.
“Those are big chunks for the market. They got us to here. If we’re gonna go further, another group will need to turn out to be too cheap,” Cramer said. “There has to be a better earnings story out here that we just do not know yet.”
Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.
Disclaimer The CNBC Investing Club Charitable Trust holds shares of Nvidia and Microsoft.
Modric offered shock new job if cult hero decides to retire at end of season
Microsoft to invest $2.1B in Spain to expand AI and cloud infrastructure
Amazon driver charged after fending off drunk, lewd migrant’s alleged attack: police
NYPD holds news conference on arrest of suspect in SoHo hotel homicide
Alabama Supreme Court rules frozen embryos are ‘children’ under state law
Why Americans Suddenly Stopped Hanging Out
New Jersey residents stocking up for several inches of snow; Winter Storm Warnings for multiple counties
Are Sprouted Potatoes Safe to Eat, or Are You Risking a Major Illness?
Tiger Woods signs apparel and footwear deal with TaylorMade following his split with Nike
Does Working Out Really Make Botox Wear Off Faster?
‘Little People, Big World’: Tori Roloff Feared Zach Roloff Had Cancer Before Emergency Surgery
The Beatles Were Shocked and Embarrassed by Don Rickles’ Jokes About Them
Signal Finally Rolls Out Usernames, So You Can Keep Your Phone Number Private
Meghan Markle and Prince Harry Are ‘All Grift, No Duty’ Says Reporter
‘Teen Mom’: Ashley Jones Will Now Be Back for Upcoming Season, Bar Smith Will Not
News20 hours ago
Rays hold first official full-team workout as Wander Franco remains absent
News21 hours ago
Meghan Markle and Prince Harry Just Fired Back at Critics With 3 Words After Sussex Website Rebrand, Canada Trip
Lifestyle20 hours ago
Millie Bobby Brown Gets Sweet 20th Birthday Tribute From Jake Bongiovi
News18 hours ago
Missouri House votes to ban celebratory gunfire days after Chiefs’ parade shooting
News20 hours ago
Prince Harry Makes It Clear He’s Not Unleashing Any More Royal Secrets With Quick 6-Word Statement
News19 hours ago
Adele explains viral meme of her sitting courtside at NBA game
News21 hours ago
Three workers electrocuted at Alexandria construction site, police say
Lifestyle7 hours ago
Celebrate National Love Your Pet Day With These Paws-ome Gifts