Jim Cramer drew a stark contrast between the financial paths of the affluent and the average consumer, using a “chip” analogy to illustrate the growing wealth gap.
What Happened: On Thursday, Cramer highlighted the disparity in the economy, emphasizing how the wealthy are investing in microchips while the average consumer struggles with the inflated cost of everyday items like potato chips, reported CNBC.
He pointed out that while the pandemic has led to an inflated economy, most Americans find it challenging to afford basic necessities, let alone invest in stocks such as NVIDIA Corp NVDA.
“The bottom line is that the paths of the people who invest in the microchips, or the enterprises that buy them, are very different from the paths of people buying knock-off potato chips, and, perhaps, never the twain shall meet,” Cramer said.
He mentioned that the returns on investments in costly microchips are so high that they become addictive for businesses, especially for new generative artificial intelligence products. This has created a significant contrast between the “haves” and the “have-nots,” with the cost of food significantly impacting the average consumer.
Why It Matters: Cramer’s analogy reflects the growing wealth gap and the challenges faced by the average consumer in the current economic climate. This is particularly relevant given the recent surge in stock prices for big tech firms, driven by the Federal Reserve’s policies, as highlighted by prominent hedge fund manager Dan Niles.
Meanwhile, the stock market has been closely watching the potential for Fed rate cuts this year, with economist Mohamed El-Erian suggesting that the market is justified in worrying about economic growth if these cuts do not materialize.
Despite the challenges, the tech industry continues to evolve, with companies like Advanced Micro Devices AMD facing hurdles in exporting a China-specific AI chip amid a U.S. crackdown. This has not stopped AMD’s rival, Nvidia, from making significant strides, with Niles naming Nvidia as one of his top stock picks for 2024.
Despite this, Cramer has also advised caution with certain stocks, such as Super Micro Computer, which he believes has become too hot for his liking.
Image Via Shutterstock
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