Tech stocks are forecast to gain 12% to 15% in the second half of the year led by the software and the chip sectors, according to analysts at Wedbush.
In a note to clients, the analysts also pointed to Big Tech as the “torch bearer” for the tech rally.
“Heading into the second half of 2023 we see a much broader tech rally ahead as investors further digest the ramifications of this $800 billion artificial intelligence (AI) spending wave on the horizon and what this means for the software, chip, hardware, and tech ecosystem over the next year,” they wrote.
“The 2nd, 3rd, and 4th derivatives of this AI gold rush are just starting to evolve for the tech landscape based on our recent work in the field and we view this as a 1995 internet moment not a 1999 dot com bubble moment.”
The analysts expect to see a stronger second-quarter earnings season for the tech space over the next month.
Microsoft and Alphabet, Google’s parent company, are set to hand down their latest quarterly earnings on Tuesday, July 25, with Facebook’s parent Meta to follow on Wednesday, July 26, and Apple and Amazon both set to report on Thursday, July 27.
“While management teams will continue to be prudent around costs and conservative for guidance, we believe the stage is now set for a tech earnings season that will put fuel in the tank of this tech rally as a more stable enterprise tech landscape and resilient consumer is front and center,” the analysts wrote.
The analysts added that, based on their recent checks over the last few weeks, enterprise spending is holding up and showing some pockets of upticks in cloud spending for 2Q, specifically by Microsoft, Amazon’s cloud division Amazon Web Services, and Google.
“That emboldens our thesis Street numbers for the tech sector will move higher from these levels into 2024,” they wrote.
The analysts concluded: “While bears will continue to fret about tech valuations and the uncertain macro backdrop, we believe this ultimately is the start of a new tech bull market we see heading into 2024 being driven by this AI revolution coupled with a stabilizing IT spending environment.”
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