CNBC’s Jim Cramer said Wednesday that rising borrowing costs are dividing the stock market into two camps: companies constrained by the bond market and artificial intelligence businesses that seem largely insulated from higher rates.
The “Mad Money” host said Wednesday’s 10-year Treasury note auction reminded him of his hedge fund days, when investors waited for the results of government bond sales before buying stocks because a poorly received sale could send rates higher and equities lower.
Wednesday’s $39 billion auction drew strong demand, helping bring Treasury yields off their multidecade highs earlier in the day. Still, stocks ended the day lower after investors were spooked by the benchmark 10-year yield briefly climbing to 5.365%, its highest level since April 2002. Cramer said the market’s renewed focus on Treasury auctions underscores how much borrowing costs matter for stocks.
“Any market where you need to wait to see the results of a Treasury auction is simply not as good as a market where you don’t care about them,” Cramer said. “Every time you add a new variable into the equation, it makes owning stocks tougher.”
Higher rates can ripple across much of the economy. Cramer pointed to finance, housing, utilities, entertainment, retail, autos and industrials as sectors where companies or their customers depend heavily on credit. However, he said AI-related companies appear to play by different rules. Data center builders, semiconductor companies, power providers and cybersecurity firms are far less constrained, according to Cramer, because lenders remain eager to finance their growth. And that also explains why the stock market has lately been so narrow, with AI stocks leading the S&P 500 back to record highs this week.
“They seem to be able to borrow at their leisure,” Cramer said. “They’re crowding out other borrowers with their demand for money.”
SpaceX is one example. According to a Financial Times report, Elon Musk’s rocket and AI company is looking to borrow $40 billion to buy Nvidia chips for data centers and sell the resulting computing power, as it already does with Alphabet’s Google and Anthropic. Despite SpaceX’s BBB credit rating and the size of the potential borrowing, Cramer expects it could secure relatively attractive terms because of enthusiasm around AI.
“If it were any non-data center related company, its [borrowing] rate would skyrocket,” Cramer said. “Not the data centers, though.”
He contrasted that with the newly named Skydance, which recently issued a similar amount of debt as part of its acquisition of Warner Bros. Discovery. The bonds quickly fell as investors weighed challenges facing the economically sensitive movie and television businesses, including cord cutting and advertising pressure.
The contrast underscores Cramer’s larger point: traditional companies remain vulnerable to higher borrowing costs, while AI businesses are largely escaping those same credit concerns. The bifurcation has been showing up in the stock market, with Cramer calling AI stocks “sainted” names.
“The AI data center stocks, aside from maybe Oracle, have nothing to do with what price the Federal government borrows at,” Cramer said. “They only have to do with a future that’s considered so bright that it obscures any problems, any bumps, even any pimples. The rest of corporate America should be so lucky.”