What the initial frenzy over GLP-1 drugs can teach us about the current market

CNBC Finance

5 min read

This market reminds me of 2023, when a prominent Wall Street analyst went all in on the impact of GLP-1s. I'm not going to name the analyst â just too vicious â but the gist of the report was that airline stocks could be winners from the soaring popularity of weight-loss drugs. The thinking? Lighter passengers would lead to significant fuel savings. When that piece came out, I knew we had to sell anything ancillary to Eli Lilly , maker of blockbuster GLP-1 drugs Zepbound and Mounjaro, and recognize that enough was enough for all except the stock of the drugmaker. Food stocks were considered because they were way too far down due to GLP-1 fears. The problem: These stocks could bounce, but they showed no growth. Even if the dividends were good â like at Conagra Brands â there simply wasn't enough upside. But to suggest that the ramifications meant good news for United or Delta was just too fanciful for words. We now find ourselves in the same spot with artificial intelligence. We are reading endless articles and research pieces about how we will not have to rely on current software, which can be obviated, or even on people (deadwood), as AI flourishes. Anthropic CEO Dario Amodei is the progenitor of much of this sentiment, which helps when you are trying to justify your company's $350 billion valuation. He's out there saying that Anthropic's code is writing code and writing code better than humans. First, I want to see it. Second, he has made so many outrageous predictions that he makes Elon Musk look like a mild-mannered Alexander Graham Bell. But he's got the mic and has managed to bring down the values of: Adobe , which can be improved upon by Anthropic for next to nothing; Workday , which can be custom made; ServiceNow , which is totally unnecessary because onboarding can be specific to an institution; and Salesforce , an expensive product that can be reproduced for a fraction of the cost. (We have a small position in Salesforce and believe in its AI-focused Agentforce, and don't think the whole suite is hurting.) Other than Adobe, which is expensive but very good, these companies are not sitting ducks. But they will end up having multiples like the food stocks, because people will presume no growth, and no growth means 16 times earnings, after you include stock-based compensation. Cybersecurity companies are losing out because new institutions and agencies can't be hacked. So why pay so much for Crowdstrike ? For this one, I am not even going to dignify Anthropic's challenge. Anthropic might talk about making AI agents safe and trustworthy, but if anyone thinks that it can match the full scope of CrowdStrike's security offerings, they don't know CrowdStrike or its CEO, George Kurtz. However, if you want to own Broadcom , Corning , GE Vernova , Sandisk , or Micron , you have to think about this. You have to think about this because OpenAI needs to raise money based on these norms, and Anthropic needs everyone to understand that Anthropic will rule the world, including your job, so you'd better get on board. It's gotten so outrageous that companies will get rid of Nvidia to, well, hire Nvidia, since these bone-crushing hyperscalers run on Nvidia. Rationality means little thought. You want to save money on jet fuel, don't you? I have given up defending any of these stocks for now; I will save it for the next monthly meeting on Feb. 27. Amazon will get a lot of business if it builds what it needs to, as will Microsoft and Alphabet . They know that if a couple of customers drop out, they can charge prices that are incredibly high and recoup all that free cash flow within a couple of years. Now, will it be a couple of years of pain? Depends. The cost of building a data center must come down, including for dynamic random access memory (DRAM). The total cost of ownership must be reasonable. There can be no shortages, and power must be unlimited. Can it all happen in two years? I don't know. Maybe all of these companies' CEOs have lost their minds. But I simply cannot believe that to be the case. I am sticking with them, arguing that they can see what I can see, but they can also see how the new debt can be serviced, and the thicket isn't impenetrable. And they won't be getting a bargain on jet fuel any time soon. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club 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 about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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What the initial frenzy over GLP-1 drugs can teach us about the current market

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