On Monday, Jim Cramer, host of Mad Money, discussed the ongoing success of major technology stocks, particularly the Magnificent Seven. He noted that these companies are proving their resilience in the market, no matter the circumstances, likening their performance to having a unique “Poltergeist 2 magic.”
Cramer pointed out that this latest rally for the Magnificent Seven differs from previous ones, as it is not merely a zero-sum game where gains for one group come at the expense of another. Instead, other sectors are also thriving, likely due to the influx of capital into the market.
“Unlike previous Mag 7 rallies, this one’s definitely not a zero-sum equation where the rest of the market does nothing. Other groups can roar, too, in this market, perhaps because there’s just a lot of money going around.”
He noted that the Federal Reserve’s rate cuts mean that cash is losing value, creating an environment ripe for growth. He mentioned that the staying power of the Magnificent Seven is truly unbelievable.
“We know these stocks will once again be hit by endless worries, giving you more opportunities to buy and more weakness before they snap right back and start climbing all over again.”
Cramer highlighted that this week marks the beginning of a crucial four-week earnings season, emphasizing that these quarterly reports hold significant weight for investors and the broader stock market. He acknowledged the current climate of anxiety, especially following the market’s impressive rally. He added:
“Why stress about how quickly the Fed will cut rates, Oh? God, I’m sick of that. What matters is they’re giving vast swaths of the economy a big boost and I doubt they’ll stop anytime soon.”
Cramer also observed that investors often gravitate toward underdogs in the market, suggesting that banks could be the next promising sector. In addition to banks, Cramer also mentioned the potential in pharmaceutical stocks, suggesting that investors might want to consider major players in that sector as well.
Jim Cramer on the Magnificent Seven Stocks Plus Netflix
Our Methodology
For this article, we compiled a list of stocks that were discussed by Cramer during his episode of Mad Money on October 14. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
While Cramer mentioned that Tesla, Inc.’s (NASDAQ:TSLA) performance has fallen short recently, he said he would not bet against Elon Musk.
“Finally, there’s Tesla… I know, Tesla… disappointing self-driving car event last week while the robotaxi shindig was definitely short on facts. At the end of the day, do you really wanna bet against Elon Musk? I don’t. I think the odds are good he’ll figure this out. So even if you don’t want to own it, you’re taking your life in your hands if you try to short it.”
Despite Tesla’s (NASDAQ:TSLA) strong presence, it is currently navigating a challenging landscape in the electric vehicle market, where demand appears to be softening. Many consumers are opting for more affordable gas-powered vehicles in response to difficult economic conditions, including elevated interest rates. Additionally, the company faces increasing competition from both established automakers and emerging low-cost electric vehicle manufacturers, particularly from China.
In the third quarter, Tesla (NASDAQ:TSLA) reported nearly 463,000 vehicle deliveries, a 6.4% increase compared to the same period last year. However, the company may yet struggle to surpass its total electric vehicle sales for 2024. CEO Elon Musk has previously indicated expectations of achieving an average annual growth rate of about 50% for several more years, though delivery figures do not seem to reflect an alignment with the goal. In a bid to stimulate sales growth, the company plans to introduce a low-cost electric vehicle model in the upcoming year, with a target price of around $25,000. It could attract a wider customer base and reinvigorate demand for its offerings.
Recently, during the “We, Robot” event, Tesla (NASDAQ:TSLA) unveiled the eagerly awaited Cybercab robotaxi, which will operate on its full self-driving (FSD) software. It is considering making these Cybercabs available to the public at an estimated price of around $30,000 each, enabling individuals to purchase fleets and potentially start their own ride-hailing services. It is worth noting that the presentation on the Cybercab was somewhat light on specifics. Lastly, the company has previously announced plans to invest $10 billion in data center infrastructure this year to support the training of its FSD models.
7. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Cramer has mentioned Netflix, Inc. (NASDAQ:NFLX) frequently over the past few days. He recently expressed a positive outlook for the company, noting that since he expressed optimism about the stock in April, it has surged over 26%, significantly outpacing the performance of the S&P 500. In the latest episode of Mad Money, Cramer said:
“I know Netflix doesn’t belong in the Mag Seven, but it was part of the original FAANG that I traced out… When Netflix reports on Thursday, you have to keep in mind that they haven’t even begun to monetize their new ad tier yet. I think [it can] de-risk this quarter because management can tell a good story about the future, which is what matters.”
Cramer has previously discussed the company’s advertising business gaining momentum, along with additional revenue streams from paid sharing initiatives. Netflix (NASDAQ:NFLX) continues to evolve as a significant player in the entertainment industry and has shown impressive advancements in its advertising business. In the second quarter, the company reported a 17% increase in revenue compared to the same period last year, accompanied by a 5% rise in profit margins.
The growth points to a successful strategy that has led to an uptick in streaming subscriptions, with paid memberships now reaching 278 million, an increase of 17% from the previous year. The company’s advertising tier is also making substantial strides, with membership in this category growing by 34% from the first quarter. As part of its ongoing efforts to advance this segment, the company is developing an in-house advertising technology platform. Management said that it is set to undergo testing in Canada in 2024, with a broader rollout planned for 2025.
Netflix (NASDAQ:NFLX) forecasts a 14% revenue growth year-over-year for the third quarter of 2024. For the entire year, based on foreign exchange rates at the end of the second quarter, the company has adjusted its revenue growth expectations to a range of 14% to 15%, slightly up from the earlier forecast of 13% to 15%.
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
Cramer has been highly bullish on NVIDIA Corporation (NASDAQ:NVDA) and mentioned the growing demand for the super chip, Blackwell. Here is what he had to say:
“Now initially, NVIDIA got clubbed along with the whole market when the yen carry trade imploded. Then it came right back because that was only a temporary problem. Then NVIDIA got smacked down after its quarter, although it didn’t take out the blows from the previous sell-off. It’s been working its way back ever since. As we learned that demand for its next-generation super chip Blackwell is ‘insane’, that’s a technical term coined by Jensen, by the way. Next thing you know, the stock’s coming all the way back, but back with very few people who sold the stock. And before this, right, I mean they’re long gone and gone at much lower levels because they traded it, they sold it. Again, take this as a reminder that if you trade NVIDIA, you probably won’t be able to sell it high and then get back in low. The ship would’ve left without you. It’s too hard, people, it’s just too hard.”
NVIDIA (NASDAQ:NVDA) has emerged as a dominant force in the technology sector, particularly in AI. Over recent years, investor interest in the company has surged, positioning it among the largest corporations globally. Additionally, on October 14, as reported by TipRanks, TD Cowen analyst Joshua Buchalter maintained a Buy rating on the stock with a target price of $165. He has designated the stock as a Top Pick and Buchalter noted a significant increase in the volumes of the Hopper architecture expected in the latter part of 2024, which could contribute to sustained growth and potentially better profit margins.
While he acknowledged some short-term hurdles tied to the evolving supply chain of the Blackwell product line, the enduring demand for these platforms remains strong. Any production delays are anticipated to shift revenue expectations from the first quarter to later in the year, without diminishing the overall demand.
Most importantly, NVIDIA (NASDAQ:NVDA) has reported that its Blackwell platforms are now fully operational, suggesting that prior production challenges have been effectively addressed. With units priced between $30,000 and $40,000, major corporations such as Microsoft and Meta are actively seeking these products to support their AI data centers.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Cramer discussed insights from JPMorgan and Evercore regarding why investors should consider buying Apple Inc. (NASDAQ:AAPL) stock, arguing that negativity surrounding the company might be overblown ahead of its earnings report.
“Today, two firms, JPMorgan and Evercore, talked about why you need to buy Apple. Both pieces stress that maybe people have gotten too bearish on the stock ahead of the earnings. So we might need to rethink all that negativity and just buy the darn thing. I mean, it’s bizarre that so many people are so eager to hate the stock of one of the greatest companies in history, especially when the stock’s been such a great long-term performer. Quizzical, isn’t it?
Yet this happens whenever they launch a new phone. It feels like almost every day we come in and some analyst lowers their estimates because of tracker work that showed iPhone 16 lead times were short and there’s not much demand, right? I mean blah, blah blah.”
Cramer noted that the analysts from JPMorgan and Evercore are taking a more optimistic stance. He also emphasized the importance of owning the stock for the long term rather than trading it.
“So many analysts have now shaded down their estimates for Apple that, get this, if business is simply okay, the estimates will prove to be too low. So these two bold analysts at JP Morgan [and] Evercore wanted to take the other side of the trade, the positive side. Plus, many of the objections to Apple may not hold as much water as they did even a couple [of] weeks ago. For example, we know a lot of people were worried about Chinese demand, but get this, if the Chinese government’s actually able to stimulate, right, the stimulus plan starts working well, don’t you think that China’s issues are a smaller concern, more money for consumers in China means more orders for the prestigious iPhone.
This is why I always say own it, don’t trade it. The analysts always try to scare you out of Apple based on incomplete data and from a long-term perspective, think about it, they’re always wrong. If you sell Apple in the most recent bout of negativity, you miss a tremendous run over the past week. And then, you did it before that you missed another run, then another and another. No wonder they call this stock the Teflon Don or at least Ben Reitzes over at Melius, a big Apple supporter calls it that, and I like it.”
Apple (NASDAQ:AAPL), known primarily for its iconic iPhone, remains one of the most reputable companies in history and is on the brink of a significant upgrade cycle driven by advancements in artificial intelligence. In September, the company introduced a suite of AI-powered features branded as Apple Intelligence. The new offering aims to advance the functionality of the latest iPhones, iPads, and Macs, providing users with tools that facilitate quick writing and summarizing of texts and emails, photo editing, and the creation of personalized images.
While the new features were not ready for public release at the launch of the iPhone 16 and iPhone 16 Pro last month, anticipation is building for the upcoming iOS 18.1, which is expected to be available on October 28. The latest operating system will integrate Apple Intelligence, further expanding the capabilities of Apple devices and promising to improve the user experience significantly.
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Talking about Alphabet Inc. (NASDAQ:GOOGL) in light of his “own it, not trade it” philosophy, Cramer said:
“Now I don’t feel the same way, candidly, about Alphabet and in part, that’s because the government has made it much harder to own it, with this antitrust lawsuit that’s aimed for a breakup, something I’m very much opposed to. I’m also concerned about Alphabet’s ability to keep putting up strong earnings. Company now has a less defensible position because it’s become more of a media business and that’s a very competitive space… So, the stock’s a comeback kid and I am so glad we own some for the Charitable Trust.”
Alphabet Inc. (NASDAQ:GOOGL) serves as the holding company formed from Google’s restructuring in 2015, with Google itself primarily recognized as a leading search engine. As a dominant player in the digital advertising sector, the company benefits significantly from its successful Google Search platform, which contributed over half of the company’s $84.7 billion in revenue during the second quarter. Google Cloud also reported great performance, achieving a 29% increase in year-over-year revenue growth in the same quarter.
However, Alphabet Inc. (NASDAQ:GOOGL) is facing significant legal challenges. The U.S. Department of Justice filed an antitrust lawsuit against the company in 2020, accusing it of engaging in monopolistic practices, including paying $26.3 billion in 2021 to companies to secure Google as the default search engine. Recently, there have been indications from the Justice Department suggesting a breakup of Google to address its perceived monopoly in search.
The Justice Department’s proposed remedies could drastically alter how users will access information online, potentially reducing Google’s revenues and allowing competitors to gain a foothold in the market. Additionally, these measures aim to prevent Google from extending its dominance into the growing field of artificial intelligence. There is also speculation that the Justice Department might seek to terminate Google’s payments that facilitate its default status on new devices.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
In the latest episode, Mad Money’s host mentioned many factors that are contributing to Meta Platforms, Inc.’s (NASDAQ:META) success presently. Here’s what he said:
“Meta’s off to the races again. Why not? Thanks to the success of reels, the targeted ads on Instagram, WhatsApp, the Meta-loaded Ray-Bans. Oh, it’s awfully hard to bet against this one, isn’t it? Very easy to make the case for Meta when you exclude the cash on the balance sheet, the stock is absurdly cheap. It’s kind of strange how cheap it is.”
Cramer recently highlighted it among the stocks that have seen the most significant gains. He pointed out Mark Zuckerberg’s statement that upcoming advertising efforts will prioritize Instagram and Reels.
One of the significant segments within Meta (NASDAQ:META) is Reality Labs, which focuses on developing hardware aimed at immersive experiences. A key offering in this area is the Meta Quest, a virtual reality gaming headset that plays an important role in the company’s metaverse vision. In addition to virtual reality, the company is venturing into augmented reality with products like Ray-Ban smart glasses and the Orion spectacles, both of which hold promise for broader market adoption. The company has also made substantial investments in its AI initiatives, especially with the development of Llama, an AI language model.
As Llama evolves, it offers the potential to seamlessly integrate hardware and social media platforms, boosting user engagement. For instance, Ray-Ban Meta’s smart glasses enable users to make phone calls, listen to music, and capture photos with a simple tap on the frame. In May, a multimodal AI function was introduced for customers in the U.S. and Canada, expanding the glasses’ capabilities.
Although the initial launch of the smart glasses faced challenges in gaining consumer interest, the latest iteration, released in late 2023, has already surpassed the sales figures of its predecessor models over two years, indicating a positive reception. Furthermore, in September, a report from Reuters highlighted a significant extension of the partnership between EssilorLuxottica and Meta Platforms, solidifying a ten-year collaboration focused on advancing smart eyewear technology.
Meta’s (NASDAQ:META) expansive reach is reflected in its user base, which has nearly 3.3 billion daily active users across its various platforms, contributing to substantial advertising revenue. In the latest quarterly report, the company achieved $38.3 billion in ad revenue, alongside an overall revenue increase of 22% compared to the previous year
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Cramer mentioned that he does not see a prominent weakness with Microsoft Corporation’s (NASDAQ:MSFT) Copilot but cited chatter around it.
“Microsoft’s supposed to be hurt by weakening demand for its Copilot, with its Copilot being their AI assistant. I have no idea if there’s a real weakness here but there is chatter and that’s enough to send the stock down. That said, I think the bears need a lot more than chatter to keep it down.”
Microsoft (NASDAQ:MSFT) has evolved beyond its origins in software, operating systems, and web browsers to become a significant player in various emerging industries. Today, it ranks as one of the largest providers of cloud infrastructure globally, which positions the company favorably to market AI products and services to its cloud clients.
In its last quarter, the company reported revenue of $64.7 billion, a 15% increase compared to the previous year. It highlighted impressive growth in its Azure Cloud services. In the quarter, Azure revenue surged by 30%. Looking forward, management expects that the results from Azure will further accelerate in the latter half of fiscal 2025, driven by substantial investments in new data center capacity that are set to come online.
Its growth is not solely limited to cloud services, Microsoft (NASDAQ:MSFT) is also experiencing significant adoption of its Copilot software, an AI-powered assistant designed to improve workplace productivity. In the fourth quarter, the number of Microsoft 365 Copilot customers increased by over 60% sequentially. With a user base exceeding 400 million for Office 365, the company remains well-positioned for continued growth in this domain.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Cramer thinks that Amazon.com, Inc. (NASDAQ:AMZN) has various growth avenues, especially AWS. He said:
“Amazon’s easy. It got hammered down from $187 to $161 after that last quarter, but it’s back above $187 now. I think the company simply has too many levers, including the incredible growth for the Amazon Web Services, which [can] take it back, I think, to its $200 high.”
Amazon (NASDAQ:AMZN) is one of the most famous global technology companies and it specializes in online retail, advertising, and subscription services. A significant aspect of its operations is its cloud computing division, Amazon Web Services (AWS), which has emerged as a crucial source of operating profit. Over the past year, AWS has seen accelerating sales growth, reflecting a broader trend as businesses increasingly migrate their data systems to the cloud.
The transition is particularly relevant as companies seek to leverage artificial intelligence tools, presenting substantial opportunities for Amazon’s future expansion. In the second quarter, AWS reported sales of $26.3 billion, marking a 19% increase compared to the previous year. Alongside its cloud segment, the company has also identified advertising as a key growth area. In the same quarter, revenue from advertising services rose by 20% year-over-year, slightly outpacing the growth experienced by AWS.
Recently, on October 10, Amazon (NASDAQ:AMZN) revealed that its Prime Big Deal Days event set new records for October shopping events. This year, a greater number of Prime members participated compared to the previous year, taking advantage of early holiday promotions. The two-day event kicked off the holiday shopping season with record sales, surpassing all previous October events in terms of items sold.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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