CNBC’s Jim Cramer addressed the optionality of six of the companies that became known as the “Magnificent Seven” on his Wednesday show.
“The Magnificent Seven has the largest option available of any publicly traded company in modern history,” Cramer said. “When you sell them, you forget that they have such incredible power.
Tesla, Amazon, Meta, Apple, Microsoft, Alphabet and Nvidia are among the “Magnificent Seven” stocks that have earned their name through their strong business fundamentals and high performance in the recent difficult market environment.
Cramer said you can see this kind of market power by looking at Google. Google shares rose as much as $5 at one point on Wednesday after news that the company could use artificial intelligence to replace its large ad sales team.
Cramer said shifting the workforce makes sense because AI would be much cheaper and more efficient, and Wall Street seemed to agree. That got Cramer thinking about all the ways Google could transform its company and create stock value.
Alphabet-owned Google isn’t the only Magnificent Seven company capable of doing this. Tesla, Amazon, Meta, Apple and Microsoft all have many options with all their divisions. Nvidia doesn’t have the same option, Cramer said, because it’s primarily a graphics card maker.
“The other six are so big, with so many divisions and so many moving parts, that if they decided to split up a loss-making division, they could skyrocket their stocks by $42, $50, or $60 billion in an instant or downsize or sell something non-essential. “One eye,” Cramer said.
Those six members can afford to have divisions that people don’t like, Cramer said, and it’s up to them whether to spin them off or invest further. Their strength lies in having the flexibility to do both.