AI hype is hurting a sector that should benefit from recession worries

The hype around artificial intelligence has crushed investor appetite for so-called recession stocks like Campbell Soup (CPB), CNBC’s Jim Cramer said Tuesday.

“This is a good company doing well,” Cramer said on “Squawk on the Street.” But he pointed out, “People do not want to own” a Campbell, which has traditionally been among the consumer staples names that investors would buy to hedge against an economic downturn due to the Federal Reserve’s aggressive interest rate hikes to stamp out inflation.

Instead, investors want to buy the Magnificent Seven, Cramer said, referring to a group of some of this year’s top tech performers tied to AI, including chipmaker Nvidia (NVDA), Instagram-parent Meta Platforms (META) and software and cloud-computing giant Microsoft (MSFT). “It’s kind of counterintuitive,” he added.

Shares of Campbell Soup have dropped about 19% over the past three months and roughly 26% year to date. The S&P 500’s Consumer Staples sector index has declined nearly 3% for the year. The broad-based S&P 500 index, for comparison, has climbed almost 15% in 2023, driven in large part by tech stocks. Nvidia, for example, has more than tripled year-to-date and traded back at record highs Tuesday after a recent slump.

Cramer’s Charitable Trust, the portfolio used for the CNBC Investing Club, owns six of the Magnificent Seven stocks. In addition Nvidia, Meta and Microsoft, the list includes Apple (AAPL), Alphabet (GOOGL) and Amazon (AMZN). Electric vehicle maker Tesla (TSLA) is the only stock in the group that Cramer’s Trust doesn’t own.

“That’s all they want, and all their acolytes and adjacencies” such as software maker Adobe (ADBE), and semiconductor firms Marvell Technology (MRVL) and Broadcom (AVGO),” Cramer added. “They just want AI and Magnificent Seven.”