Cramer Analyzes Wednesday’s Tech Sell-Off

Jim Cramer reviewed Wednesday’s tech sell-off, highlighting investor disappointment with Alphabet and Tesla earnings. $S&P 500 Index(.SPX.US)$ and $Nasdaq Composite Index(.IXIC.US)$ had their worst days since 2022, dropping 2.31% and 3.64% respectively. $Alphabet-A(GOOGL.US)$ fell over 5%, while $Tesla(TSLA.US)$ plummeted more than 12%.

Cramer noted Wall Street's shift from mega caps to small caps, believing mega-cap stocks reached unsustainable levels. Despite Alphabet’s strong search and Google Cloud revenue, YouTube ad revenue missed expectations. Tesla’s earnings missed forecasts, with declining automotive sales, though CEO Elon Musk emphasized future growth areas like self-driving tech and energy production.

Investors are pivoting to the S&P 600 small cap index, with stocks like Fabrinet, ATI, Ensign Group, SPS Commerce, and Mueller gaining. Cramer pointed out that some of the "Magnificent Seven" tech stocks are now cheaper than many small caps on a price-to-earnings basis but suggested that only further price drops might stabilize them amidst the current market rotation.