Jim Cramer breaks down three major sectors of this economy

CNBC’s Jim Cramer on Wednesday identified and reviewed three distinct aspects of the current economy, explaining how he thinks this dynamic is impacting market action.

“We have three economies right now,” he said. “Two of those are booming, although one shouldn’t be, and the third one is hurting, badly, and it needs help right now.”

He first pointed to the booming segment related to artificial intelligence and the data center, referencing JPMorgan research that suggests AI-related stocks have accounted for 75% of S&P 500 returns, 80% of earnings growth and 90% of capital spending growth since late 2022 following the launch of OpenAI’s ChatGPT. He listed off some of the “heavy hitters” in the business, namely Meta, Alphabet, Amazon, Microsoft, Nvidia, Tesla, Broadcom, Micron, AMD, Dell and Oracle. Cramer brushed off investors fears that today’s data center hype is similar to the ill-fated dotcom boom 25 years ago. He said he doesn’t believe the tech megacaps will go bust because most are profitable and have deep pockets — while the former high flyers of the dotcom era had little earnings and revenue.

Another area is the “so-called real economy,” Cramer said, which encompasses a wide swatch of business sectors including retail, housing, freight, autos, as well travel and leisure. Many businesses from these categories are suffering, Cramer continued, even the usually reliable consumer packaged goods stocks. There are signs that this economy is not doing well even as Wall Street lacks recent economic data due to the ongoing government shutdown, he continued, citing a Tuesday report from analysts at investment giant Carlyle that suggests job growth in September was essentially flat. While there are pockets of strength, such as banks, Cramer said this aspect of the economy needs multiple rate cuts from the Federal Reserve to improve.

Cramer said the other major part of the economy is a slew of speculative names that he said have climbed too high — especially because many of the frothiest companies in the group don’t have solid earnings. He pinpointed some companies related to nuclear power, cryptocurrency and quantum computing. Cramer suggested that this segment feels more similar to the dotcom boom than the AI sector, saying that “this speculative cohort has to be stopped before its froth overwhelms everything else.”

“It’s these speculative stocks that are the real bubbles — not the AI plays,” Cramer said. “Yet you’d never know if you listened to the bears, they conflate them all.”

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Disclaimer The CNBC Investing Club Charitable Trust owns shares of Nvidia, Amazon, Microsoft, Meta, Nvidia and Broadcom.