Tech to rally in 2024 as AI leads biggest transformation since birth of the internet
Wedbush sees the tech sector ready to accelerate in 2024, even after rallying this year.
The bank expects artificial intelligence and cloud computing spending to boom next year as use cases spread.
“We view AI as the most transformative technology trend since the start of the Internet in 1995 and believe many on the Street are still underestimating the $1 trillion of AI spend set to happen over the next decade in a bonanza for the chip and software sectors looking forward with Nvidia and Redmond leading the way,” analysts led by Dan Ives wrote in a note.
“The tech sector is set up for an acceleration of spending around cloud and AI spending that we believe is still being significantly underestimated by the Street.”
The high expectations for the tech industry comes as the NASDAQ 100-Index (NDX) is up 47% in 2023 so far. Nvidia (NVDA), expected to be a major beneficiary of artificial intelligence, is up 227% year-to-date after easily trouncing earnings expectations.
Microsoft (NASDAQ:MSFT), a major investor in OpenAI, which created ChatGPT, rose 56% in 2023 through today.
Ives and his team note that murky macroeconomic environment that remains and the shadow of the Federal Reserve’s high interest rates, as well as tech stocks having high valuations. Nonetheless, the bank is fully behind the industry.
“The fundamental picture for growth tech stocks is rock solid based on our recent checks in the field,” the bank said. “The new tech bull market has now begun and tech stocks are set up for a strong 2024 with tech stocks we expect to be up 20%+ over the next year led by Big Tech as the AI spending tidal wave hits the shores of the broader tech sector.”
The analysts cite Nvidia (NVDA), Microsoft (MSFT), Datadog (DDOG) and Palantir (PLTR) as having delivered robust results that give further confirmation that AI use cases are multiplying across the enterprise and consumer landscape.
“While IT budgets are expected to be up modestly in 2024, we believe cloud and AI driven spending will be up 20%-25% over the next year with use cases now exploding across the enterprise and consumer landscape.”
Wedbush’s favorite tech names include Apple (NASDAQ:AAPL), Microsoft (MSFT), Google (NASDAQ:GOOG) (GOOGL), Palo Alto Networks (PANW), Palantir (PLTR), Zscaler (ZS), Crowdstrike (CRWD) and MongoDB (MDB).
Cloud service divisions will be among the first to benefit from AI, including Amazon’s (AMZN) AWS and Alphabet’s (GOOG) (GOOGL) Google Cloud Platform. The two segments will acquire AI-capable chips, build AI-capable service offerings and sell those services into their respective installed bases.
More on Apple, Alphabet, etc.
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