Cramer says higher rates are splitting the market in two — and AI stocks have a big advantage

CNBC's Jim Cramer said Wednesday that rising borrowing costs are dividing the stock market into two camps: companies constrained by the bond market and artificial intelligence businesses that seem largely insulated from higher rates.

The "Mad Money" host said Wednesday's 10-year Treasury note auction reminded him of his hedge fund days, when investors waited for the results of government bond sales before buying stocks because a poorly received sale could send rates higher and equities lower.

Wednesday's $39 billion auction drew strong demand, helping bring Treasury yields off their multidecade highs earlier in the day. Still, stocks ended the day lower after investors were spooked by the benchmark 10-year yield briefly climbing to 5.365%, its highest level since April 2002. Cramer said the market's renewed focus on Treasury auctions underscores how much borrowing costs matter for stocks.

"Any market where you need to wait to see the results of a Treasury auction is simply not as good as a market where you don't care about them," Cramer said. "Every time you add a new variable into the equation, it makes owning stocks tougher."

Higher rates can ripple across much of the economy. Cramer pointed to finance, housing, utilities, entertainment, retail, autos and industrials as sectors where companies or their customers depend heavily on credit. However, he said AI-related companies appear to play by different rules. Data center builders, semiconductor companies, power providers and cybersecurity firms are far less constrained, according to Cramer, because lenders remain eager to finance their growth. And that also explains why the stock market has lately been so narrow, with AI stocks leading the S&P 500 back to record highs this week.

"They seem to be able to borrow at their leisure," Cramer said. "They're crowding out other borrowers with their demand for money."