Mad Money 04/01/26 | Audio Only

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Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramer friends. I'm just trying to make a couple of bucks here. My job, not just to entertain, but to do some teaching. Call me 1-800-743-CBC. Tweet me at Jim Cramer. Whenever the market gets clobbered and then starts crawling back, you always hold out hope that there'll be a broad advance, lots of different groups powering higher, easily accessible to the masses that might have been blown out by the recent decline. As we pound our way through our second day of this rally, I can definitively say that, well, this is not one of those moves. This one is limited. It's small. It lacks any real leadership that you can hang your hat on, at least so far. It's worth filling you in on the disappointment.

After a seemingly strong day where the Dow gained 224 points as we jumped 0.72%, the Nasdaq went up 1.16%. Because I want you to understand my skepticism now about the rally, I was looking for more today. Why don't we start with a big winner so you can put them in context? They're heavily involved with one industry. I want more than that. The data center, of course. First, we have the big four of memory: Western Digital, SanDisk, Seagate, and Micron. We often hear that the world's short of memory and storage, and what they really mean is that we need to store a lot more data for AI to comb through. These four companies make storage. They're a semi-constant presence on the new high list. How come? Because memory was a bad business for so long, almost a pure commodity, low margins. So when it turned out that they were sitting on a gold mine thanks to the rise of the data center, well, they were caught flat-footed. Only Micron is adding capacity at scale, and it's still sold out near-term. So are the others, although they're trying to build new kinds of storage, but that's for 2028 and 2029. They just can't build capacity fast enough. And until someone can build a different kind of storage, their stocks might continue to roar higher.

Even as a purist like me doesn't want the market to be led by the stocks of companies that are basically sold out and can just raise prices but not do more than that. We want to be led by companies like Nvidia, which are producing product and selling it as soon as it comes out because it's so desired. Nvidia deserves a premium price-to-earnings multiple. These companies, not so much. But Nvidia really hasn't done much. The second group of stocks leading us higher are the fiber optic plays that help transport data within the data center. Now we're talking about Lumentum and Coherent and Ciena. They're all part of the data center plumbing. Nvidia has put $2 billion each into Lumentum and Coherent, cementing the relationships. Good investments. Again, not a lot of companies in the fiber networking connect business. Semiconductors and companies related to them are always on the biggest gainers list. This time it's Intel that's leading because the company's buying back part of an Irish facility it sold to private equity when it really needed money. So see, it's a sign of strength that they're buying it back. Intel's balance sheet, after teetering for so long, is now rock solid.

Then Teradyne squeezed into the top gainer list. That's all about semiconductor test and measurement equipment. Again, narrow, narrow, narrow. Finally, a lone non-data center, non-semiconductor stock appeared on the list. It's Newmont Mining. What a classic letdown to be led by a gold miner. Not even the best one, which is Agnico Eagle. Listen, I love growth stocks. I talk endlessly about the need to invest in growth stocks. Only a handful of these winners are actually growth names. The rest are companies that raise price for a living because they're benefiting from shortages. So, what do I want to see next if this rally is to be believed, like the rally we had last spring as the president gradually rolled back his Liberation Day tariff announcements? Well, the first thing I'd like to see is actual data center leadership. Actual. And that would mean Nvidia with a stock that started strong today but then fizzled. Or, you know, how about CoreWeave, which builds and manages data centers and barely held its head above water today. Same goes for Amazon, Meta, Google, and Microsoft, which need data centers and can't stop building them. Today wasn't a bad showing for Amazon, Meta, and Google, but once again, Microsoft failed badly.

I can't tell you how worried I am about the stock of Microsoft and what it's up to or not up to. There's a palpable sense that something's very wrong there, that it's lost its way, that Copilot needs to be redone. Now, I don't want to oversimplify things, but if you work in an office, there's a fairly good chance that your procurement company gives you a computer that's loaded with Microsoft product. There's also a fairly good chance that if you can afford it, when you get home, you've got an Apple machine. Now, think about this. The fact that you're given a machine at the office that's stuffed with everything Microsoft, that you're bombarded by Microsoft internal and infernal ads, that you're told endlessly to use Copilot, that full screens pop up to get you to use various Microsoft products, and the stock still can't go higher. That's just incredible. They have the biggest edge imaginable: a totally captive audience thanks to their dominance with Windows. The idea that people would rather pay for their Apple device than use the computer they get for free with all sorts of IT help, I find that almost unfathomable. It's downright painful. I know of no other product with that kind of head start that isn't the dominant part of your work life. I pay for every service out there except Copilot because I just don't see the value versus the others. But you know what? That doesn't mean anything. Here's what means something. I'm baffled.

You know who doesn't seem to realize that things are awry? Microsoft. There's not a peep out of them that anything might be wrong. If you listen to management, they still seem to think they're kings of the world. Why do I own Microsoft for my charitable trust at this point? Because the people who run the company really are smart. They really are serious. Surely they're concerned that Copilot may not be the answer. Definitely, they've got to understand the things that I've said. Do they use Apple at home themselves? Would they lose their job if they did? Either way, I think Microsoft gets its act together, and I am hoping they do. It'd be good for the country. But the stock in my trust portfolio, it's on borrowed time, and I've done a bad job owning it, and that's up to me. Like I said yesterday and today with Nike, I screwed up by owning this stock. Made me a lot of money for a long time. What does that mean? Second, I'd love to see some strength in the retailers. Don't look now, but the stock of Walmart is barely up while Costco and Target are both down. Home Depot's up. Lowe's is down. Pathetic parody of strength. I always want to see some strength in the financials, if only to see if there's a hangover from the problem that caused the downturn, the war with Iran. But JPMorgan and Bank of America are barely up. American Express unchanged, even as it's down more than 18% for the year. I would have expected more. Finally, because we need rate cuts to sustain this rally, I would have liked to have seen the home builders rally. But other than D.R. Horton, we're just not getting the pin action that we need.

Remember, housing punches above its weight class in the economy because of all the accoutrements that go with a home sale, including RH, by the way, which was down a cool 27 points or 19% thanks to a bad quarter last night. RH has a mountain of debt, $2.4 billion. It missed the quarterly estimates and bought back a lot of stock at higher prices. It's a suboptimal situation. Here's the bottom line. This second-day rally isn't necessarily a failure, but students of rallies know that the second day should be powerful, with new leadership and a follow-through that's broad, that lasts until 4 p.m. and doesn't quit in early afternoon. That didn't happen. This rally started losing steam around 1:30 p.m. Still a good day, but it could have been much, much stronger and much, much more powerful. Let's go to Julian in Florida, please. Julian?

Oh, sure. Thank you.

Yeah.

This is a company that I've been recommending is short for many, many years. Now it does have an activist investor. Maybe they can get them to do something or even sell themselves. But, you know, five bucks, maybe, I don't know what, couple bucks up, one down. Not a bad ratio, but nothing I'm interested in. All right, we want to rally with broad leadership that lasts throughout the day, not one that quits in the middle. We made money tonight as we cap off the first quarter of a volatile year. I'm taking a look at the leaders and laggards of this market. First, I'm running through the top 10 best performers yesterday. See what's working and whether the themes have any staying power. Then tech has been the leader of the laggards this year. So I'm honing in on the worst of the worst when I look at the bottom 10 performers in the Nasdaq 100. And private player SemiAnalysis has become one of the most trusted voices in chips. Don't miss my exclusive with the founder and CEO. Stay with us.

Finally, close the books on a pretty terrible first quarter. Even after yesterday's phenomenal run, the Dow finished the first three months of the year off 3.6%, the S&P tumbled 4.6%, and the Nasdaq lost 7.1%. Mostly thanks to the war with Iran causing a monster spike in oil prices. Still, there were some real winners out there, even if they were pretty hard to find. Which is why tonight I want to go over the 10 best performers in the S&P 500 for the first quarter. After the break, we're going to come back with the 10 worst performers in the Nasdaq 100, because that's a tech-heavy index where the most heinous declines were in tech. I just felt we should put those two different ones, a nice contrast with each other. Let's start with the best of the best. We're coming back to the worst of the worst after the break. When you look at the S&P 500's 10 biggest winners over the last three months, it kind of looks like what happened today. Most of them are either tech hardware plays with exposure to the data center, as I talked about at the top of the show, or they're materials and energy stocks that soared thanks to the war with Iran causing shortages. Let's do tech hardware first. The number one performer in the S&P was SanDisk, up 167.7%. The maker of flash memory storage products had more than quadrupled last year, and it kept running in the first quarter thanks to the data center-induced memory shortage. This time, SanDisk just broke away from the rest of the pack. Western Digital, Seagate, Micron, which are up 18 to 57%. It's still pretty darn good, but nowhere near close to SanDisk. The thing is, while the memory stocks were all white-hot in January, then resilient in February and early March, they did get obliterated over the last couple of weeks. Micron, for example, reported an incredible quarter mid-March, but its stock fell from 461 on March 18th all the way down to 321 on Monday, even though it was a good quarter. Can these stocks recover from the recent pullbacks and start moving higher? Well, if you're a memory bull, the last two days have been pretty darn encouraging. As soon as President Trump started talking about unilaterally ending the war, SanDisk and his compadres just caught fire. I always tell you this is inherently a boom-and-bust industry, but we've only had four quarters in the boom so far. Historically, I've found that they tend to last at least six. Still, my guess is that the easy money's already been made here. I don't blame you if you want to try to be in, but it's not my stuff. Next up, the second best performer in the S&P was Lumentum Holdings. That's a fiber optics play that just got out of the index last week. Hence the 90.7% gain in the first quarter after the stock quadrupled last year. As long as the AI data center buildout continues unabated, I think these fiber optic stocks can keep winning. Although maybe not as much as they've been winning over the last 15 months. Still good for them. Welcome to the big show, Lumentum. Going further down the list, the eighth best performer, Ciena, is in the same boat. It's another fiber optic play that's up 66% thanks to surging demand for networking from the data center. Ciena also returned to its place in the S&P 500 back in February. As long as we keep building these things, they're going to need companies like Ciena. So again, you see the pattern that I'm concerned about. These stocks just came right back today, and they provided the leadership for the first two days of the quarter, today and the last day of the quarter. Here's the problem. We know how bad the last quarter was, right? So therefore we know these don't have a lot of followers, and they don't have a lot of followers even today. Let's talk about the next group, the companies that benefit from the shutdown of the Strait of Hormuz. You got LyondellBasell, that's up 86%. It's plastics. Dow up 78%. Polyethylene chiefly, though they make a lot of others, but that's really the driver. The third and fourth best performers in the S&P. These are two commodity chemical companies, and their stocks were some of the worst performers in the index last year, but they are already starting to bounce back in January, weeks before the war with Iran kicked off, because everybody thought we'd get multiple rate cuts this year. And that's true for textbook cyclical stocks like the petrochemicals. Turns out they benefit even more from petrochemical shortages caused by the Iranian government. I think Dow and LyondellBasell might be at risk of a pullback if the war ends and the strait reopens. But then again, there's a real possibility Iran will keep the trade closed after we leave, just to show us they mean business. I don't want to, I really don't want to mess with these stocks. I think you should kaching kaching. The seventh best performer in the S&P was CF Industries, up nearly 68%, which makes some of the key inputs for fertilizer. Even before the war, we had the beginning of a bull market in agriculture. Then when the Persian Gulf got blocked off, we realized there would be a fertilizer shortage. Now that's bad for just about everybody, including you, because the food price is going to go up. But it's terrific for CF Industries and its compadres. Not that many of them, though. Next up, I was a little surprised that crude oil is up more than 70% year to date. There were only three oil plays among the S&P's top 10 performers: APA, Texas Pacific Land, which you know we've liked a lot, and Occidental Petroleum, which frankly we haven't liked at all. APA, the old Apache, finished the quarter up nearly 75%. That's good for fifth place in the index. This is a major independent oil and gas producer that's been a long-term underperformer, but crucially they have no exposure to the Persian Gulf. Next, there's Texas Pacific Land. That's a quirky story, which had a 65% gain, making it the ninth best performer in the S&P. These guys own a bunch of land in the Permian Basin. And while they don't own the mineral rights, they lease their surface holdings to energy companies that want to drill, while also selling them water, which is essential for fracking. But the stock's down more than 14% this week, which is what you would expect if the war ends. This is kind of a prelude. The strait reopens and the price of oil comes down. How about Oxy? Occidental Petroleum is up 58%. Ever since Oxy, as it's known, acquired Anadarko nearly seven years ago, it became the higher-risk way to play the price of crude. People do that. Instead of buying a crude index, they buy Occidental. When oil goes higher, this stock rallies hard. But when oil comes down, the stock gets pulverized. Basically, Oxy is a big loser if peace breaks out and a big winner if Iranians insist on keeping the strait closed. Finally, aside from the data center plays and the commodity plays, there's a one-off in the top 10 list, and that's Moderna, up 72% in the first quarter, the sixth best performer in the S&P. Moderna cleaned up during the pandemic, but then spent years lost in the wilderness as they never came up with anything that could replace the COVID vaccine. Lately, though, the stock's been breaking out, settling key lawsuits that have been overhangs, getting its new flu vaccine reviewed by a previously hostile FDA. And then last month, we learned that Dr. Vinay Prasad, that's the vaccine skeptic who RFK Jr. put in charge of the vaccines at the FDA, he'll be leaving at the end of this month. Great news for Moderna, which is primarily a vaccine company. So, here's the bottom line. When you look at the top 10 best performers in the S&P 500 last quarter, you find a few IT hardware names, some commodity chemicals and energy stocks that benefit from high prices thanks to the Iran shortages, and then Moderna, which had one positive catalyst after another. But what about the underperformers? I want you to stick around after the break. I'm going to go over the worst of the worst in the Nasdaq 100. A little bit eye-opening. Mad Money is back after the break.

Before the break, I went through the top 10 performers in the S&P 500 during the first quarter, but the winners really don't tell you the full story, especially when the quarter was pretty terrible for the market. Now, we also need to focus on the losers for the first quarter. They're the worst performers. It was very tech-heavy, and that's why we want to go with the Nasdaq 100. That's the 100 largest non-financial companies in the Nasdaq composite. Every single one of these, this is amazing, every single one of these is an AI displacement story. Even if competition from AI hasn't really started hurting them yet. It's premature, but Wall Street's convinced the damage is coming. And I've got to tell you, I'm starting to agree with them. The worst Nasdaq 100 stock first quarter, by a wide margin: Atlassian, down nearly 58%. The company makes collaboration software, particularly for software developers, hence its symbol TEAM. Given that AI has gotten very good at writing code, that's the basis of the AI displacement narrative. Atlassian is basically ground zero. Investors think that there's no need for software developers to work together on Atlassian tools. Oh god, they were so popular at one point. In fact, they may not need to work together at all. They can all just work with Claude. Of course, Atlassian's still doing fine now. They reported a beat-and-raise quarter in February. But good luck telling the sellers that. There are places where I'm willing to stick my neck out and bet against the AI displacement trade. This is not one of them. I think it feels too darn risky. Second worst performer. Wow. AppLovin, down almost 41%. This is a former market darling which helps mobile game developers and other digital businesses to grow their reach and monetize their platforms through advertising. Had the business to itself. It's honestly, it is a very fine business, by the way, with fantastic growth and impressive profitability. But the stock got really expensive entering this year. It was selling for more than 45 times earnings. That left the stock of AppLovin very vulnerable. If your stock has a high multiple and there's even a whiff of concern that it could be displaced by AI, then investors will sell first, sell, sell, sell, and ask questions later. Third worst was one I really wasn't that familiar with. It's called CoStar Group, down 40%. Now, you can think of it as kind of the Zillow of commercial real estate. Problem is, this quarter was brutal for companies that compile and organize useful data, a business model that can easily be duplicated by the big AI platforms. Is that the right read, though? Doesn't really matter for now. The fourth worst name in the Nasdaq 100 was a company that I used to adore. It's called Workday, and its stock was down 40%. The company makes enterprise software for corporate finance and human capital management. Hey, you know what? This is another double-whammy situation. It's an enterprise software company, strike one, and it's focused on human capital management tools, strike two. You want to know why? Because the rise of AI means layoffs. I have a lot of respect for Workday. I'd like to say that the concerns here are overblown. But I tried to say that at the end of January, and then almost immediately the company's CEO at that point, Carl Eschenbach, stepped down, and Workday reported a mixed quarter with plenty of issues for the bears to pick at. I've learned my lesson. Don't try to be a hero in this group. The fifth worst Nasdaq 100. Wow, you've seen this fall on Zscaler. Zscaler down almost 38% in the first quarter. Zscaler is a cybersecurity play, and Wall Street's convinced that cybersecurity is vulnerable to AI displacement as any other kind of enterprise software. Now, as you heard directly from CrowdStrike's George Kurtz last week, Palo Alto's new catch last night, that's actually dead wrong. And here I will draw the line. It's dead wrong. Of course, if you want to bet on cybersecurity, I'd much rather own CrowdStrike or Palo Alto Networks than Zscaler. We own both for the charitable trust, but in fairness, Zscaler shouldn't have been hit all that hard. Sixth worst, another one I want to kind of stick my neck out a little bit here on. It was down only 35% in the first quarter. I'm willing to stick my neck out. Why for Intuit? Because even if the AI platforms can develop similar software, they don't have the brand that consumers and small business owners know and trust, nor do they have Intuit's network of experts that can get you out of a jam. And by the way, the accountants like Intuit. Remember that this stock got hit hardest in January and February, but then actually up 8% since CEO Sasan Ghahramani spoke to us on February 26. I'm hoping that's the start of a larger comeback. And I think it deserves to, but I know it's going to take time because people have written it off. Number seven, odd one: DoorDash, down nearly 34% in the first quarter. That's right. DoorDash. AI displacement bears have been coming for all sorts of online marketplace stocks. Why? A company like DoorDash is all about network effects, but the AI doomers say these network effects go away once all information is available to everyone via AI platforms. I don't buy that. Once the user base is there, I think it's very hard for these marketplaces to be toppled. And DoorDash is now the cheapest it's ever been. I like it. I think the stock of DoorDash can be bought here. The eighth worst name in the Nasdaq 100 was Thomson Reuters, down nearly 32%. And this is another example of a business services play getting hit by AI competition fears. Thomson makes software that compiles financial data, which we use here at Mad Money, and they also own Westlaw, a similarly essential online legal research service. You don't need Westlaw, though, if you have a system that can comb through all the decisions ever written in just a few seconds. Can Claude do all the things these platforms do? Wrong question. The right question is, do you...

want to stick with Thomson Reuters while we wait to find out? Money managers won't do that. The ninth worst decliner is Adobe, which was down over 30% in the first quarter. But that's really just the latest indignity, I should say, for this snake-bitten former cloud king, which everyone knows is, or at least they assume, is toast. At $241 and change, Adobe's stock is down more than 65% from its all-time high set in November 2021. Stock now trades at just 10 times this year's earnings estimates. It's trading like a home builder, for heaven's sake. But anytime OpenAI, Anthropic or Gemini comes out with some new design tool, Adobe stock goes lower. They now have new competition. Figma, which has also been terrible too. The stock... Canva, there's a... that's an ultra-cheap option. So why am I to... who am I to say that Adobe stock has gotten too cheap? It can always get cheaper. One day the design schools will leave behind Adobe and start their students on Canva. That will make the end of Adobe's design dominance, and it could be existential from there. Finally, there's Shopify, down 26% in the first quarter. This one's like AppLovin. It's got a great business with tremendous growth and impressive profitability, but its stock just got too high. Even here, it sells for 64 times this year's earnings estimate. Frankly, I don't think there's a compelling AI disruption case against Shopify. These guys are mission-critical for small and medium-sized businesses that operate online. Unfortunately, money managers are no longer willing to pay a premium multiple for this kind of company, and 64 times earnings ain't cheap. Here's the bottom line. The biggest losers of the first quarter were nearly all victims of AI displacement worries, even if some of those worries are less legitimate than others. Still, unlike the war, this is a problem that's not going away. Iran might stop shooting at oil tankers in the Strait of Hormuz, but Anthropic will never stop gunning for the enterprise software plays. Let's go to Chuck in Florida. Chuck,

>> Dr. Cramer, a big, big, big Snowberg Buckeye booyah to you, man. >> Well, I'm liking that, and I like the spirit of it, and I like the intent of it. How can I help you? >> Well, first let me let you know I'm a club member and I'm digging it. >> Oh. Oh, fantastic. You know, Jeff Marks and I work pretty darn hard, and it's obviously well-received. And I know we're doing a promotion for the club that I'll probably talk about at one point if I haven't already. Okay, let's go to work. >> Yes, sir. Hey, my question is about that Rule of 40 juggernaut Palantir. >> Well, you know, Palantir right now, I have to tell you, here's what's going on with Palantir, Chuck. It was a very hot stock. It's a great company, first of all. I mean, a great company. And sometimes stocks mirror how stocks do. Sometimes stocks just get overheated and sellers come out. Palantir is basically building a new base because, boy, their business is strong. I'm relying on the customers. The customers love them, and therefore I think they've got a great product, and therefore I think they will have a great 2026 and 2027. Anyway, the biggest... and thank you for the nice comments. The biggest losers of the first quarter were nearly all victims of AI displacement worries. I think this is a problem that's not going to go away, and I'm going to keep highlighting it for you all this year because you need to know why these stocks are going down. Now, there's much more Mad Money ahead, including my exclusive with SemiAnalysis. The founder of this research company has become a go-to voice in the chip industry, with his work reaching all the way up to Jensen Huang. Don't miss our wide-ranging conversation. Then, big news out of Eli Lilly is pushing the GLP-1 space further into the future. I'm giving you my takeaways, and of course your calls rapid-fire in tonight's edition of the Lightning Round. So, stay with Cramer.

I think this is going to be a terrific segment. When you look at the best performers from the first quarter, like we did earlier, a huge number of them are AI data center players. And when you look at the worst performers, well, they're practically all victims of AI displacement. That means it pays to know more about the entire AI supply chain. Which brings me to SemiAnalysis. That's an independent research company specializing in chips and AI. They've grown from a Substack account into a global team of analysts and engineers that recently got a shout-out from Nvidia's Jensen Huang at the keynote speech at GTC. These guys are the gospel. So, let's check in with Dylan Patel. He's the founder, chief analyst, and CEO of SemiAnalysis to get a better read on the industry. Mr. Patel, welcome to Mad Money.

>> I like that. I like it because you're iconic, but you're accurate. You do the benchmarking, which is the most important thing. So, yes, I do regard you as gospel, and what a go-to someone in your position, I think, can help us. Is there a misconception between what Wall Street thinks of tech and what you know to be the case when it comes to actual tech?

>> Well, do you find things too doctrinaire? For instance, when you talk with people on Wall Street, they'll say SaaS is finished. There's no value in SaaS. Any of the companies that were taken private that are SaaS are finished, and they're part of the private credit morass. Whereas other companies that, you know, Anthropic and OpenAI seemingly can do no wrong.

>> Well, I can tell you, Dylan, that that is a metric that doesn't get much attention on Wall Street. We do ARR, and we talk about who's got the best product and who's the most exciting, but that is a terrific metric that I have to start incorporating. See, this is an example why I wanted you on. I think we often times judge companies by how they were in the past, and we don't think about how they will be in the future. And how they will be in the future is about scale, and they can't have scale if they charge too much. I'm going to ask you about the most controversial stock that we think... Adobe. We don't understand how Adobe can still be, say, a hundred-billion-dollar company or close to it when they're charging so much and people are willing to get a product that's very similar for far less. What happens?

>> Totally right. Totally right. There's just been this legacy of love that doesn't work. Now, when I was at GTC, I was watching Jensen, and he was trying to figure out how he could describe that he understands inference when a lot of people feel... I don't want to get too in the weeds for our audience, but that he's training and inference is so important. He used your data, he used your benchmarking to show that he was the king of inference. What did that feel like for you? Because I know that was not why you did it.

>> Well, it's an honor deserved. No one else is doing the kind of work you're doing. I want to ask you about another misconception when it comes to Wall Street. We just chronically talk about... I'll put 'we' in because I do mouth some of what Wall Street says. I admit that these companies are overspending and that the capex is a disaster, and yet I look and see, well, you can't even spend as much money as they're talking about. But I need you to tell me whether we are over-focused on overspend.

>> Well, I've been schooled by Ruth Porat many times from Google, so I know that you're absolutely right. Now, one last thing. I saw a little post that you made about Microsoft 365. I'm not as big a fan. Obviously, your comments yesterday indicate the same. I find Copilot to be just unusable. And I wanted to know where you came down versus, say, the others that we all tend to use, whether it be Perplexity or Grok. I've grown comfortable with Gemini. ChatGPT is too chummy with me. How do you rate Copilot as part of the mix?