Cramer explains what the Fed’s rate cuts mean for tech stocks

CNBC’s Jim Cramer on Wednesday discussed the repercussions of the Federal Reserve’s interest rate cuts on the technology sector, saying he thinks they hinder tech stocks because the companies don’t necessarily stand to benefit from lower rates.

“With a double-sized rate cut that everybody already expected, you aren’t gonna see a huge run in tech. It doesn’t have the edge when we get the big cuts,” he said. “Right now, the Fed’s helping companies that need a healthy consumer.”

The Fed started of its cutting cycle strong, lowering rates by half a point and indicating it would cut by 50 more basis points by the end of the year. The move marks the first rate cut since the pandemic, and the Fed said in a statement that its decision came “in light of progress on inflation and the balance of risks.”

Cramer reflected on the time he’s spent in San Francisco at enterprise software outfit Salesforce‘s annual conference, saying the tech companies at the event — many of which are pushing artificial intelligence initiatives — don’t care about the Fed’s cuts. Unlike companies in the retail or housing sector, large tech companies are largely divorced from the consumer and the labor market, and cater to the enterprise, he added. Big Tech and its peers are focused on AI automation that will boost companies’ earnings and allow them to perform more work with fewer workers, he said.

Consumer-oriented companies may be the ones to own during this cutting cycle, Cramer suggested, even though tech stocks can still be winners with rates coming down. According to Cramer, Wall Street abandons these secular stocks for ones that rely on lower rates, and there’s only “so much cash to go around.” He added that investors make a distinction between companies that do well most of the time and ones that can perform extremely well during certain points in the business cycle.

“On days like today, we want the companies that desperately needed a rate cut, because they just got what they wished for,” Cramer said. “But tech? It got out of the wish game a very long time ago.”

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer The CNBC Investing Club Charitable Trust holds shares of Salesforce.