CNBC’s Jim Cramer said Tuesday that today’s stock market is nowhere near the kind of bubble that preceded the dot-com crash.
While companies such as SpaceX may fuel perceptions of excess, Cramer argued they are exceptions to the rule, rather than representative of the broader market.
“There are always outliers,” the “Mad Money” host said. “There is some froth, but the froth does not represent what we trade. What we own.”
Stocks have surged to new highs over the past year as enthusiasm surrounding artificial intelligence fueled massive gains in semiconductor and other AI-related companies. Memory-chip makers Micron and Sandisk have jumped more than 243% and 644% this year, respectively. That rally has led some investors to question whether the market has become overheated, drawing comparisons to the dot-com boom of the late 1990s.
Cramer disagreed, pointing to lower interest rates, stronger corporate earnings, and far more reasonable valuations than investors saw during the tech bubble.
The latest consumer price index report came in cooler than expected Tuesday, he noted, which eased concerns that the Federal Reserve would soon need to raise interest rates.
“You don’t get a dotcom crash scenario without a series of tremendous rate hikes and we simply aren’t there yet — new Fed Chair Kevin Warsh spoke today and he didn’t sound like he would tighten if the CPI stays at these levels,” Cramer predicted.
Cramer also argued valuations look far more reasonable than they did at the peak of the dot-com era. Heading into 2000, the S&P 500 traded at more than 25 times forward earnings, according to FactSet data, compared with about 20 times today.
“That’s a big difference, and while 20 isn’t exactly cheap, it’s certainly not expensive like 2000,” he said.
He also pointed to several of the market’s largest companies trading at what he considers attractive valuations despite reporting strong results. Bank of America, Goldman Sachs, and JPMorgan all reported substantial earnings and revenue beats on Tuesday, he said, and trade at roughly 12 to 18 times forward earnings. Cramer’s Charitable Trust, the portfolio run by CNBC’s Investing Club, owns shares of Goldman Sachs.
“These are all ridiculously cheap,” Cramer said. “And you think that’s frothy?”
The same argument extends to technology, he said. Cramer noted SK Hynix trades at roughly four times 2027 earnings estimates, while Micron is at six times 2027 numbers. Nvidia, meanwhile, trades at a similar multiple to the broader market, he said, despite its dominant position in artificial intelligence. Cramer’s Charitable Trust owns shares of Nvidia.
“What typifies this market is the inexpensive nature of so many big-cap stocks,” he said.
