Proactive Investors - In the wake of NVIDIA's (NASDAQ:NVDA) ‘mic drop’ earnings last week, analysts at Wedbush see no end to the bullishness in big tech as, the stockbroker says, a tidal wave of AI-driven spending is on the horizon for the sector over the coming years.
Whether tech stocks can keep going higher is a key debate going into the US Labor day holiday, the California-based broker says in a note, yet it reckons they will “rip higher into year-end”.
A new bull market for tech starts here, that’s according to analyst Daniel Ives, who believes Amazon (NASDAQ:NASDAQ:AMZN) and Google owner Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) will follow on the heels of Nvidia’s rapid rise thanks to the rapid scale-up in AI-related activity.
It’ll initially be seen in the Google Cloud Platform (GCP) and Amazon Web Services divisions, he notes, as the cloud compute providers provide the infrastructure for the consumer-facing AI applications.
“AI demand story is as REAL as any tech trend we have seen in the last 30 years only comparable to the Internet in 1995 and Apple (NASDAQ:AAPL)'s iPhone launch in 2007.
“Today its Nvidia on the front line supplying the GPU/chips, but ultimately the most important takeaway is transformational AI growth is now coming to software, chips, digital media over the coming years with $1 trillion of spending in clear sights for the tech sector.”
Ives added: “The impact of the AI cycle on consumer Internet will be massive and it will start w/ the cloud service divisions, Amazon’s AWS and Alphabet’s GCP.
“AWS and GCP acquire AI-capable chips, build AI-capable service offerings, and sell those services into their respective installed bases.
“Those customers, Amazon Retail and Google Search included, adopt the AI-enabled services to build capabilities into their existing consumer offerings.”
In his manifesto-like sector commentary the bullish tech analyst, meanwhile, noted what even casual investors will have picked up upon – not every software developer, semiconductor maker or cloud computing provider is seeing the same lucrative demand that Nvidia has.
Indeed, plenty of Silicon Valley’s executives have in the past month talked up their plans (hopes and dreams) for the bright AI future, but, none have been close to the success that Nvidia is so far seeing.
Ives, however, claims Nvidia is just the first to see such transformative ‘special growth’ and investors need a longer-term view to capitalize on what he says will be a “once in 30 years” tech trend.
“Will Microsoft (NASDAQ:MSFT), Salesforce, Oracle (NYSE:ORCL) among others see the growth this quarter like Nvidia? NO....but its the rocket ship-like trajectory of AI driven growth that will hit the shores of the tech industry over the next 12-18 months that speaks to our unabated bullishness for tech stocks,”
“We also see an improving spending for software, chips, and digital media consumer growth into 2024.”
He added: “In our opinion the transformational special growth trends/stories you cannot put in some forward one year PE box and just say its expensive.
“With names like Nvidia and once in a 30 year tech trends like AI we believe investors need to have a 3-year view of where these growth stories go, what is the incremental margins and cash flow to the models down the road, how does the growth story change?”