HomeBusinessTech stocks could have sustained rally after Thursday’s bounce

Tech stocks could have sustained rally after Thursday’s bounce

CNBC’s Jim Cramer said that the rally in tech stocks Thursday could spark a longer-term recovery, as the beaten-down names struggle to stay afloat in a seesawing market.

“You need to recognize that tech could have more than just a temporary bounce, at least if you’re looking at companies that provide new life to the enterprise, even as, admittedly, the consumer side still looks pretty ugly,” the “Mad Money” host said.

The tech-heavy Nasdaq Composite rose 2.28% on Thursday, buoyed by Samsung’s 11% profit surge and 21% revenue leap that pushed chipmakers and the rest of the tech sector higher. Shares of AMD gained 5.2% and Nvidia climbed 4.8%. ON Semiconductor surged more than 9%. 

The rally was a welcome reprieve for names that have been hammered by the Russia-Ukraine war, Covid lockdowns in China and the Federal Reserve’s series of interest rate hikes. And while bounces in the tech sector have generally stayed short and sweet this year, Cramer said he believes the stocks could see a sustained recovery — even if the economy enters a recession.

“Why do I think tech now has staying power? Because first, the Chinese consumer might be coming back, but second, more importantly, the enterprise isn’t getting as weak as you’d normally expect in a Fed-mandated slowdown,” he said.

China shortened quarantines for international travelers last month, though an uptick in Covid cases in the country has tightened health protocols in some cities. Bank of America Securities said it doesn’t expect China to reenter an extended lockdown as it did in the second quarter, though it acknowledged that the rebound in Covid cases could lead to some volatility.

Cramer reminded investors that tech companies’ products and services extend beyond laptops and home office equipment whose popularity has cooled off since the height of the pandemic. He added that an economic downturn could even increase demand for technology companies’ services.

“Tech’s deflationary. You can lay off lots of people with new technology. You can figure out how to make things more cheaply, do more with less, because of technology. You can make better products with more tech. All of this is happening now,” he said.

Disclosure: Cramer’s Charitable Trust owns shares of AMD and Nvidia.

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