What a September rate cut would mean for stocks, plus a bullish call on AI spending
Investment
CNBC

What a September rate cut would mean for stocks, plus a bullish call on AI spending

August 4, 2025
06:30 PM
7 min read
AI Enhanced
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Every weekday, the Investing Club releases the Homestretch; an actionable afternoon update just in time for the last hour of trading.

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7 min read

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investment

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Published

August 4, 2025

06:30 PM

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CNBC

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investmenteconomymoneystockstradingtechnologyenergymarket cycles

Every weekday, the CNBC with Jim Cramer releases the stretch — an actionable afternoon , time for the last hour of trading on Wall Street. : Wall Street is putting together a strong bounce-back session Monday after wrapping up last week on a sour note thanks to a weak jobs report

All three major benchmarks — the S & P 500 , -heavy Nasdaq and 30-stock Dow — added more than 1% in afternoon trading

It's a broad-based rally, with 10 of the 11 sectors in the S & P 500 in the green

Energy is the laggard, weighed down in large part by declines in s of ExxonMobil and Chevron , by far the two largest constituents in the sector

We took advantage of the positive day to lighten up on s of Abbott Laboratories , our third sale since July 21

If not for our trading restrictions, we would've used some of the cash raised in that sale to buy more Starbucks , consistent with what Jim said last week ing the coffee chain's post-earnings decline

BLS drama: President Donald Trump on Monday was again posting on social media that last week's big July nonfarm payrolls miss and the massive combined downward revisions to May and June were rigged

Those s echoed the ones that came Friday as he fired the head of the Bureau of Labor Statistics

On CNBC Monday morning, National Economic Council Director Kevin Hassett, one of Trump's top advisers, was asked directly if the BLS numbers were rigged

He acknowledged the longstanding blem of jobs data collection that pre-dated Trump but said, "All over the U.S. government, there have been people who have been resisting Trump everywhere they can." Hassett, who has been talked as a possible Trump choice for Federal Reserve chairman, also said, "To make sure that the data are as transparent and as reliable as possible, we're going to get highly qualified people in there that have a fresh start and a fresh set of eyes on the blem." Ironically, the weak jobs numbers bolster Trump's case for the Fed to cut interest rates

Jim Cramer said Monday that he is not here to opine on whether Trump is doing the right thing or not

However, Jim said he is here to help members make money

He that the jobs numbers point to a weakening economy and suggest the Fed should not wait any longer to cut rates

If the Fed cuts rates at its September meeting, as the market expects, Jim said the stock market should go up, even ahead of the move, and investors should make money

Keep on spending: The generative AI boom isn't slowing down anytime soon, according to Morgan Stanley's analysis of capital expenditure (capex) plans

In a note to clients, analysts said the 11 largest hyperscalers — including holdings Meta Platforms , Microsoft , Amazon and Apple — are jected to significantly increase their spending on cloud computing and other AI-related infrastructure into next year

Analysts expect the global capex from these companies to grow 56% year over year in 2025 and 31% in 2026

The estimates are based on second-quarter earnings reports from the aforementioned giants, along with those from Alphabet -owned Google, IBM , CoreWeave and Oracle , along with the Chinese firms Tencent , Alibaba , and Baidu

Additionally, Morgan Stanley analysts said they wouldn't be surprised to see 2026 capex commitments "move materially higher" by this time next year due to the continued growth in AI model output and cloud viders still mentioning that demand for compute is outstripping supply. "This earnings season, most management teams highlighted the need to accelerate infrastructure deployment timelines/address tight supply and support increasingly complex cloud/AI workloads, and executives across MSFT, META, AMZN and GOOGL signaled: (1) greater confidence in generating a return on these investments; and (2) a willingness to sustain elevated levels of spending into 2026," the analysts wrote

This is all mising news for the generative AI trade

As these hyperscalers pour billions into AI infrastructure, it signals that management teams are taking the nology — and the demand for it — even more seriously than before

We hope this means imved AI offerings from our portfolio companies, too

Apple, in particular, is in desperate need of one, which is why we were pleased to hear CEO Tim Cook say on the conference call that the company is "significantly growing" its AI investments

Apple has comparatively spent much less on capex in recent years compared with the s of Meta, Microsoft and Amazon

The iPhone maker has had a lackluster rollout of its suite of AI tools called Apple Intelligence since last year

Buzzy new AI features could mean more upside in device sales and revenues in its high-margin services unit

With Apple, "we're actually trying figure out what they really want to do," Jim said during Monday's Morning Meeting

As for Microsoft, Amazon and Meta, we've been largely impressed by their AI plans. "The market wanted to see a lot of [AI] spend because that's where the return is," Jim said

He continued, "You may think they spent too much money

People want to see a lot of spend." It's not just Big and their cloud customers that benefit from all the AI outlays

Industrial stocks and holdings Eaton , GE Vernova and Dover all benefit in their own ways from the continued construction of data centers and the electricity infrastructure needed to fuel the power-hungry buildings

Earlier Monday, we published an in-depth look at how GE Vernova's gas turbines became such a hot commodity in the AI race

Up next: name Coterra Energy is among the companies reporting earnings after the close Monday, with its conference call set for Tuesday morning

We'll wait for the call before publishing our earnings analysis, given management's s, particularly on its planned fix for blematic wells in part of the Permian Basin, will help shape our thinking on the results

Some other notable companies reporting Monday night include high-flying Palantir , obesity drug compounder Hims & Hers , Taser maker Axon Enterprise , e-commerce marketplace MercadoLibre and non-opoid pain medication maker Vertex Pharmaceuticals

On Tuesday morning, we'll get results from names DuPont and Eaton

Economic bellwether Caterpillar, private-equity giant Apollo Global Management and hotel operator Marriott International also are on the docket

It's an overall quiet week of economic data, though on Tuesday the Institute for Supply Management's monthly look at activity in the U.S. services sector is due out at 10 a.m

ET. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a r to the CNBC with Jim Cramer, you will receive a trade alert before Jim makes a trade

Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio

If Jim has talked a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade

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