In this piece, we will take a look at Jim Cramer’s ten bearish tech stock calls.
For Jim Cramer, tech stocks and the Federal Reserve’s interest rate cuts are a major talking point. Investors continued to deal with an uncertain macroeconomic picture that was complicated by a ‘bullish dove’ of a Fed that cut interest rates by 25 basis points but also hinted that 2025 would see fewer rate cuts than expected. The day the Fed announced the interest rate cut, the benchmark flagship S&P index sank by 2.95%, with more speculative investments such as Bitcoin dropping by a sharper 8.6%.
Yet, as has been the case with the macroeconomic picture, the sell-off appeared to be a bit too much. Two days later, on Friday, the Commerce Department released the ever-important Personal Consumption Expenditure (PCE) dataset. The PCE is the Fed’s preferred inflation reading, and it revealed that the annualized inflation in November was 2.4%. This reading was shy of 0.1 percentage point of economist expectations. As a result, it signaled to investors that perhaps the Fed might take it easy with the interest rates heading into 2025.
The slightly improved expectations saw the S&P gain 1.86% on the day of the PCE data release. Cramer was optimistic as well, sharing that the data was “somewhat reassuring. Because if we do get lower inflation, I think it’s certainly a possibility because we’re starting to get our arms around what’s really causing inflation. Then it doesn’t seem so devastating, what happened on Wednesday.”
However, he added that the bullish data release didn’t mean that markets would reverse all their losses since Wednesday. Despite the fact that inflation ticked lower, the S&P index is still down 1.83% since the data release. Cramer shared some insight into the reasons behind the weakness. According to him, the market has been speculating a lot on areas such as quantum computing and Bitcoin. The CNBC host outlined that “rampant Bitcoin speculation, after speculation in nuclear power, after speculation in quantum computing” had driven the market performance ahead of the rate announcement. Consequently, since these areas lack fundamentals, investors might 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 gained as much as 162% over the past month – a development that would, on the surface, indicate a groundbreaking shift in their prospects. However, these movements have been driven primarily by Google’s Willow quantum computing chip. The hype surrounding 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 stock that ranked 16th on this list of stocks that he talked about, the host wondered what had driven its 162% in returns. Likening quantum computing stocks to non-fungible tokens, Cramer commented:
“How are these companies going to, how is D-Wave Quantum by the way, how is that going to quantum? When we don’t even know what quantum is? It’s a nonfungible tokens, right? Cause you know what a fungible token was?”
As for the Fed, he believes that the central bank’s data-dependent strategies backfired with the bullish rate outlook as “they chose not to be data-dependent.” On the episode of Mad Money aired the day of the rate cut, he speculated that Fed Chairman Jerome Powell seemed to have been “caught having to fulfill a prediction of the need for a rate cut, and that need was no longer self-evident. The data didn’t back it up.” Cramer added that he believed “It would have been much better off if they had explicitly taken a wait-and-see approach before this meeting. This time they telegraphed the wrong thing. Hence today’s meltdown.”
On the next day, Cramer added the Fed might have been better off ahead of the call not having signaled that it was going to cut rates. However, as it did the opposite, it was locked into cutting rates while the data pointed towards a robust economy that might not have needed lower interest rates. “I think it confused people. It confused people because they cut rates and then gave exactly the, what I would call the [inaudible] for not cutting rates,” shared Cramer and added that the Fed “got trapped, Jay got trapped.”
For 2025, Cramer wants investors to focus on stocks that might change the world. In a recent Mad Money episode, he outlined that some stocks tend to stand against the tide due to fiercely loyal followers. Sharing some advice, Cramer stated:
“There’s a lesson here and it is a brutal one. Sometimes conventional methods of valuation are completely worthless, and you need to embrace the dynamics of cult stocks. The trick is to recognize when we’re in one of those moments. In 2025, let’s strive to find the stocks of companies that do defy orthodoxy.”
Our Methodology
To make our list of Jim Cramer’s bearish tech stock calls, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out stocks he was bearish on, analyzed their performance, and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? 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).
10. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders In Q3 2024: 30
Date of Cramer’s Comments: 8-22-24
Performance Since Then: -6.70%
Iron Mountain Incorporated (NYSE:IRM) is a specialty real estate investment trust. The firm caters to the needs of the data center industry, and it allows businesses to co-locate their data centers. It is a well-diversified firm with little than half of its revenue coming from IT-related services. During the first nine months of 2024, Iron Mountain Incorporated (NYSE:IRM) brought in 58.6% of its revenue from renting out storage and 39% from services. Storage revenue is constrained when broader IT spending is weak, as has been the case this year. Iron Mountain Incorporated (NYSE:IRM) has sought to counter this by focusing on its services business and expanding it through acquisitions. Service revenue grew by 17.1% during the first three quarters to outpace broader revenue growth by 4.6 percentage points. As for Cramer, he advocated selling some shares to lock in gains in August. Since then, while Iron Mountain Incorporated (NYSE:IRM)’s shares have lost 6.70%, they did gain 13% until the end of October. Here is what Cramer said:
“We like Iron Mountain, but with the yield dropping below 4%, you’re getting less return for growth. I suggest selling some shares to lock in your gains, maybe take out your initial investment, and let the rest run.”
9. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders In Q3 2024: 33
Date of Cramer’s Comments: 09-05-24
Performance Since Then: -16.17%
Super Micro Computer, Inc. (NASDAQ:SMCI) is a computer hardware company that sells servers, networking systems, and other IT equipment. It is one of the most controversial stocks of 2024 and one that has remained at the center of investor attention due to its exposure to AI GPU designer NVIDIA. Super Micro Computer, Inc. (NASDAQ:SMCI) is among the few companies in the world that assembles NVIDIA’s GPUs into servers and sells them to businesses. It has benefited from liquid cooling products that are essential for GPUs to compute power-intensive AI workloads. However, Super Micro Computer, Inc. (NASDAQ:SMCI)’s shares are down by 72% since their March peak after a short seller report highlighted accounting discrepancies at the firm and the IT company failed to file its annual report. Cramer was worried in September when he shared:
“I’m not a believer in this, to be honest. I thought the Hindenburg report was good. I wouldn’t have been as enthusiastic if it weren’t for that filing the company made the next day. I think Super Micro is good, but when you read the Hindenburg report, it’s clear they need to improve their accounting practices, and that’s what worries me.”
8. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders In Q3 2024: 58
Date of Cramer’s Comments: 09-19-24
Performance Since Then: 6.48%
Lam Research Corporation (NASDAQ:LRCX) is a semiconductor manufacturing hardware firm that is one of the key players in its industry. The firm has struggled in 2024 as the broader non-AI semiconductor industry has struggled due to slowdowns in the consumer mobile and computer markets. Lam Research Corporation (NASDAQ:LRCX)’s shares are down 1.5% year-to-date, with the firm’s Chinese exposure also driving investor uncertainty. During its fiscal year 2024, 42% of the firm’s revenue was from China while memory chips contributed $14.9 billion. US sanctions on China and the memory slowdown have not helped the chip sector in 2024 either. Cramer mentioned some of these facets in September, and since his remarks, Lam Research Corporation (NASDAQ:LRCX)’s stock has lost 6.48%:
“Lam Research is a key semiconductor capital equipment maker. Right now, they’re being suppressed by a lack of Chinese orders, not to mention Intel slowing its European manufacturing plans. If not for those issues, I think it’d be a great buy right now. But given that the industry has problems, I say let it come down even more. However, Lam is the best in the group.”
7. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders In Q3 2024: 60
Date of Cramer’s Comments: 08-20-24
Performance Since Then: 17.40%
Cisco Systems, Inc. (NASDAQ:CSCO) is one of the biggest IT hardware firms in the world. It sells products such as routers, switches, and optical networking equipment. Cisco Systems, Inc. (NASDAQ:CSCO)’s shares had lost 10.4% until August 14th as the broader non-AI IT spending slowdown affected the firm. However, its fiscal Q4 earnings report saw the firm guide Q1 revenue at a $13.75 billion midpoint which was higher than analyst estimates of $13.71 billion. Its Q4 revenue and adjusted profit per share sat at $13.64 billion and $0.87 and also beat analyst estimates. Since the earnings, Cisco Systems, Inc. (NASDAQ:CSCO)’s shares have gained 30%. Soon after the earnings, Cramer warned viewers to not chase the stock over $50.
“I thought it was a very good quarter, but it seems that there wasn’t much follow-through afterward. To me, it feels like you shouldn’t chase it here over $50. However, I do like what they’re doing, especially with Splunk, and Chuck Robbins, the CEO, bought Splunk at what appears to be a good price. Things are looking better, inventory is clean, but I wouldn’t recommend buying aggressively over $50. That approach doesn’t work for me.”
6. ARM Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders In Q3 2024: 68
Date of Cramer’s Comments: 08-22-24
Performance Since Then: -2.20%
ARM Holdings plc (NASDAQ:ARM) is a British chip design house whose IP is present in the majority of smartphone processors and other chips. This enables the firm to enjoy a wide moat, which has strengthened in today’s era of data centers and cloud computing. Big tech firms have used ARM Holdings plc (NASDAQ:ARM)’s designs to make in-house chips. The firm has also sought to further solidify its market presence by providing an off-the-shelf solution to firms looking to design chips. However, ARM Holdings plc (NASDAQ:ARM)’s shares are down by 16% over the past six months as they have been driven by the firm’s inability to significantly benefit from the ongoing AI boom despite its near-ubiquity in the smartphone industry. In August, Cramer shared that he preferred ARM Holdings plc (NASDAQ:ARM) over Intel, and the latter’s stock has lost 5.6% since his comments:
“Intel is struggling with competition from AMD and Nvidia, and I prefer ARM Holdings over Intel in the current tech landscape. Intel has challenges but may benefit if it can leverage AI advances effectively.”
5. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders In Q3 2024: 71
Date of Cramer’s Comments: 08-19-24
Performance Since Then: 25.81%
Datadog, Inc. (NASDAQ:DDOG) is a specialty software-as-a-service (SaaS) company that enables businesses to monitor and analyze their cloud software operations. Its business model provides the firm with a unique exposure to the AI industry as it allows AI users to manage and monitor their tools. The strong demand for its products, particularly from AI operators, has allowed Datadog, Inc. (NASDAQ:DDOG) to beat analyst estimates for its second and third-quarter earnings. However, the stock remains vulnerable to the broader economic outlook as was evident in December when Datadog, Inc. (NASDAQ:DDOG)’s shares fell by 4.26% after the Fed took a hawkish tone after its December interest rate cut. In August, Cramer had warned viewers to be wary of the stock:
“Datadog is usually a fabulous company. There were people trying to buy it for $20 billion before it ever went public. My problem is that it’s just the definition of enterprise software—the kind of analytics that tells you how your company’s doing. There are too many players in that space, Dave. So I’m going to reiterate: I don’t trust it yet, but it is a very good company. And thank you for the question.”
4. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders In Q3 2024: 71
Date of Cramer’s Comments: 08-16-24
Performance Since Then: 27.35%
Snowflake Inc. (NYSE:SNOW) is a data warehousing company which estimates show holds a sizable 22% market share. Its business model and market share create unique opportunities in the AI wave as data is the ‘oil’ of AI models. However, Snowflake Inc. (NYSE:SNOW)’s shares are down by 13.9% year-to-date as the firm has been hit with a slowdown in the broader cloud industry and battled management issues. The second half of the year has been kinder to Snowflake Inc. (NYSE:SNOW) as it appears to have regained its footing. The stock is up by 26% since its third-quarter earnings report which beat analyst revenue and product revenue estimates. The release also saw Snowflake Inc. (NYSE:SNOW) guide Q4 and full-year revenue at $908.5 million and $3.43 billion to beat analyst estimates. Since Cramer’s remarks in August, the shares have gained 27.35%. Here’s what he said:
“The latest feedback I’m getting about Snowflake is that they’re facing some difficulties and are being challenged by a couple of companies. It’s kind of a tough road for them right now. I think I’m going to hold off on recommending it.”
3. Micron Technology Inc. (NASDAQ:MU)
Number of Hedge Fund Holders In Q3 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 major memory chip manufacturers in the world. It is also the only American firm of its kind. Consequently, the semiconductor firm enjoys wide exposure to the AI industry as its HBM3e products are among the few that can be used in AI GPUs. However, Micron Technology Inc. (NASDAQ:MU)’s scale also means that the broader non-AI consumer and enterprise computing market has to perform for its shares to do well. The stock is up by a modest 8.4% year-to-date as it has been hurt in particular by a slowdown in the personal computing market. Back in August, Cramer had predicted that Micron Technology Inc. (NASDAQ:MU)’s stock could fall to $98:
“So, Micron Technology (MU) saw a steep decline, but after the company announced their buyback program, the stock stabilized around $92 before rebounding. It has recently come back down, and I think it could drop to around $98 or $99. At that point, I would consider buying more.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders In Q3 2024: 136
Date of Cramer’s Comments: 08-26-24
Performance Since Then: -15%
Uber Technologies, Inc. (NYSE:UBER) is the biggest ride-sharing service provider in America. Estimates show that the firm controls 76% of US ride-sharing spending, and this business also accounted for 51% of its revenue during H1 2024. Consequently, Uber Technologies, Inc. (NYSE:UBER) depends on consumer spending and economic activity for its financial and share price health. The stock fell by 7% in October when bookings for the quarter missed analyst estimates, and overall, it has gained a modest 5.70% year-to-date. Uber Technologies, Inc. (NYSE:UBER) is also facing competition in the autonomous driving market, as was evident in December when the shares fell by 9.6% after Google’s Waymo announced that it would be expanding to Miami. Here’s what Cramer said in August:
“I actually like buying some Uber here and then waiting for a little bit of a pullback. Uber is doing incredibly well, and you may not get that pullback, so I want you to get some on the sheets as we talk about it. It is up a lot this month, so let’s be careful and only buy some, not all.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders In Q3 2024: 193
Date of Cramer’s Comments: 08-20-24
Performance Since Then: 10.19%
NVIDIA Corporation (NASDAQ:NVDA) is the world’s leading GPU designer. 2024’s close has seen investor and street sentiment about the stock concerned about competition that might eat away the market share for the firm’s AI GPUs. However, in multiple appearances, Cramer has dismissed these claims and stressed that he views AI chips from firms like Broadcom and Marvel will complement and not compete with NVIDIA Corporation (NASDAQ:NVDA). On a broader level, the firm’s hypothesis depends on stable shipments of its AI GPUs and sustained demand for AI products. Here’s what Cramer shared in August:
“I almost feel like you can guess it—it’s Nvidia. It’s the king, and the rest of the market is made up of its pawns, marching to Nvidia’s drum. Remember this morning when I was on the call and said, “Look, Nvidia is almost too important. There’s too much pressure on Nvidia—can it sustain it? I don’t want Nvidia to be Samson.
“Take a look at this daily chart of Nvidia, going back to February. By the way, Larry, who advised selling Nvidia just before it peaked in the spring, predicted the stock would rise again in late May. Larry and his video calls have closely tracked the stock’s short-term cycle in red, which has followed the share price surprisingly well.
“Unfortunately, the short-term cycle now projects that Nvidia should peak sometime next week, leading to a sell-off that may extend through mid to late October. Nvidia reports next week, and the long-term cycle indicates a bottom around the same time. Given that Larry sees Nvidia as the lynchpin of the market, it makes sense that the cycle forecast predicts a downturn for Nvidia, aligning with expectations for the S&P 500.
“Yes, Nvidia is that influential. The chart interpreted by Larry Williams suggests that we might experience some pain as August ends, which could continue through mid to late October. I hope he’s wrong this time, but it’s wise to consider his analysis seriously. For my money, there’s a good chance he could be right, especially if Nvidia’s outlook isn’t strong.”
NVDA was a tech stock Jim Cramer was worried about in August. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some 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 NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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