Investing.com -- Wedbush analysts are forecasting a strong third-quarter tech earnings season, driven by solid enterprise spending, and a rebound in digital advertising. The firm believes the ongoing “AI revolution” will drive tech stocks higher through the end of the year.
The analysts think that the primary narrative from this earnings season will be the beginning of the next phase of the AI revolution. Hyperscaler cloud leaders Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN) are all expected to deliver robust growth, surpassing Wall Street expectations as more workloads migrate to the cloud, setting the stage for numerous AI enterprise use cases and models to be deployed by 2025.
Cloud strength, however, is not confined to the Big Three, Wedbush notes. Companies such as Oracle (NYSE:ORCL), SAP SE ADR (NYSE:SAP), IBM (NYSE:IBM), ServiceNow (NYSE:NOW), and Dell (NYSE:DELL) are also identified as "foundational cloud stock players" that should experience increased strength as enterprises accelerate their AI and cloud deployments. This trend is seen as laying the groundwork for what Wedbush describes as the "second derivative" of the AI revolution.
"We believe 70% of global workloads will be on the cloud by the end of 2025, up from less than 50% today," the analysts said.
Overall, Wedbush maintains a bullish outlook for tech stocks, predicting another 20% move higher in 2025.
As the Federal Reserve, under Jerome Powell, embarks on an aggressive rate-cutting cycle, they see a macroeconomic soft landing as the most likely outcome. They emphasize that AI spending is part of a generational shift in tech investment, just beginning to impact the sector.
According to their estimates, every $1 spent on an Nvidia (NASDAQ:NVDA) GPU chip generates an $8-$10 multiplier across the tech industry, further reinforcing their positive stance on tech stocks in the coming year.
While Nvidia and Microsoft are seen as central drivers of AI, Wedbush also highlights the growing involvement of other tech giants, including Oracle, SAP, ServiceNow, Palantir (NYSE:PLTR), Salesforce (NYSE:CRM), Dell, IBM, Apple (NASDAQ:AAPL), and AMD (NASDAQ:AMD), among others.