As the earnings season wraps up, there has been a noticeable retreat in some of the prominent players within the technology sector, such as Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), both of which have experienced declines over the past month.
While the broader market indices display volatility, it is probable that any downward movement in the tech sector will be of short duration. Wedbush Securities suggests that the rise in stocks will likely be led by artificial intelligence (AI), projecting an upward trajectory.
Analyst Dan Ives reaffirms his earlier prediction that tech stocks will witness an additional 12% to 15% surge before the year concludes, attributing this optimism to the emergence of a new bull market. This resurgence is anticipated to be driven by enterprise cloud investments and substantial projects from tech giants like Microsoft (MSFT), Amazon (NASDAQ:AMZN), and Google (NASDAQ:GOOG) (GOOGL).
Amazon's stock experienced a notable increase following its second-quarter results, benefiting from robust guidance and a stabilizing Amazon Web Services. Ives describes this period as a "flex the muscles quarter."
At the heart of these developments is the AI frenzy, a dominant theme in the capital markets this year that draws parallels to the early days of the internet.
Based on an analysis of numerous conference calls over the past month, it becomes evident that the AI trend is reshaping both the enterprise and consumer landscapes. This transformation is leading to a division in spending priorities, favoring areas like cloud services, cybersecurity, digital advertising, and enterprise solutions, while other sectors like PC and infrastructure show softness.
Ives acknowledges minor instances of weakness in certain areas, citing recent reports from companies like Fortinet (FTNT), Datadog (DDOG), Snap (SNAP), and Alteryx (AYX), which expressed concerns about future prospects. However, he believes these concerns are transient, particularly as AI appears poised to dominate discussions in the years to come.
The current phase is characterized by the implementation of AI use cases and the expansion of its infrastructure, laying the groundwork for an imminent surge in spending. Companies such as Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Google (GOOG) (GOOGL), Oracle (ORCL), Palantir (PLTR), MongoDB (MDB), Snowflake (SNOW), Salesforce (CRM), AMD (AMD), and C3.AI (AI) are expected to reap the rewards.
With the Federal Reserve likely concluding its rate hike cycle and the ongoing momentum in AI investments, Ives envisions a favorable "green light risk-on environment" throughout the remainder of the year. This bullish market sentiment is projected to persist and flourish over the next 12 to 18 months.
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