Proactive Investors - The current artificial intelligence (AI) “gold rush” combined with stabilizing demand is a “green light” for owning tech stocks, Wedbush Securities analysts wrote in a note to clients.
They believe AI has changed the tech world and investor sentiment, with the transformational technology being a “1995 internet Moment... NOT a 1999 Dot.Bubble Moment”.
The analysts noted that heading into the second half of 2023, they see a much broader tech rally ahead as investors further digest the ramifications of this $800 billion AI spending wave on the horizon and what this means for the software, chip, hardware, and tech ecosystem over the next year.
“We believe overall the tech sector will be up another 12%-15% in the second half of this year led by software and the chip sector with Big Tech remaining the ‘torch bearer’ for this tech rally continuing to heat up,” they wrote.
Analysts at UBS called the AI transformation “the start of a 4th Industrial Revolution” that is playing out across tech over the coming years, which they believe is still being underestimated by the Street.
They estimate AI could comprise up to 8% to 10% of overall information technology (IT) budgets for 2024, up from about 1% in 2023, with software based AI spend a “laser focus” of chief information officers around the globe.
The analysts concluded that while Microsoft (NASDAQ:MSFT) and Nvidia are clear market leaders in the AI race, along with Google (NASDAQ:GOOGL), other technology companies such as Oracle (NYSE:ORCL), Amazon (NASDAQ:AMZN), Salesforce, Palantir, MongoDB, Apple (NASDAQ:AAPL), IBM (NYSE:IBM), Meta, Adobe (NASDAQ:ADBE), Snowflake, C3.ai, will benefit as companies are expected to collectively spend tens of billions in “this AI arms race” over the coming years.
They believe Microsoft, in particular, is in a unique position to gain share in the cloud market that could expand the company's total addressable market around cloud by 35% to 40% over the coming years.