CNBC's Jim Cramer on Wednesday said that as Wall Street's desire to buy the "Magnificent Seven" tech stocks has waned, dividend-paying stocks are grabbing more attention.
"The market has, momentarily, fallen out of love with the Mag Seven," Cramer said. "This is a new market — that's right — where the mega cap techs are no longer the leaders. It's a market where money's being put to work in a lot of boring higher-yielding stocks as well as smaller caps, health care, banks, REITs and utilities."
Most of 2023 was dominated by the mega cap tech stocks — Apple, Alphabet, Meta, Microsoft, Amazon, Nvidia and Tesla. But since U.S. government bond yields peaked in October, an index tracking these tech stocks has underperformed the equally-weighted S&P 500, which gives each company the same influence over its performance. The traditional S&P 500 is weighted by each constituents' market capitalization.
Cramer attributed this change in part to a growing number of investors who believe the Federal Reserve is going to start cutting interest rates, making these dividend stocks more valuable.
He pointed to several "new darlings" on the market, including banking and healthcare companies. Investors are using profits from the Magnificent Seven to buy these dividend stocks, he said, explaining that this is how the market is seeing a "rotation" away from Big Tech.
However, Cramer emphasized that the Magnificent Seven remain great companies, and this rotation won't be permanent.
"Don't worry, the seven will eventually return to their rightful place," he said.
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Apple, Alphabet, Meta, Microsoft, Amazon and Nvidia.
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