Ahead of the start of the US earnings season, one bullish tech analyst has proclaimed the 'AI revolution' would continue to propel the Wall Street tech rally ever higher.
With the S&P 500 index up 15.3% in the year to date and the more tech-centric Nasdaq Composite having jumped almost 32%, Dan Ives at Wedbush Securities forecast a broader tech rally in the coming months.
The tech sector will climb another 12%-15% in the latter half of 2023, he said today.
Ives’ bullish outlook is buttressed by promising signs of increased enterprise IT spending, which he said was based on his team's "recent checks over the last few weeks... showing some pockets of upticks on cloud spending" at the likes of Microsoft Corporation (NASDAQ:MSFT), Amazon's AWS and Alphabet Inc's (NASDAQ:GOOG) Google for the past quarter.
He said this "emboldens" his team's thesis that Wall Street analysts' numbers for the tech sector will move higher from current levels into 2024.
Drawing parallels to the 1995 internet boom, Ives is bullish that AI will be the new growth engine for the wider economy.
"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.Bubble Moment," he wrote in an email to clients.
He suggests AI could represent 8%-10% of overall IT budgets by 2024, up from approximately 1% in 2023.
Microsoft and Nvidia are "at the top" of the AI race, but Ives expects other tech stalwarts and smaller industry players to invest significantly in AI, heralding a vibrant second half of the year for the tech sector and a long "battle" over the next decade.
Heading into the new earnings season, which effectively kicks off on Friday with the big US banks, that "should bring more optimism" into Wall Street forecasts for the rest of this year and into next, he said.
By no means everyone on Wall Street is as confident as Ives, with hedge funds reported today to have made a big pivot away from US stocks and investment banking giant Citi predicting the S&P will retreat from here by the end of the year.
But he's far from alone, with Bank of America predicting last week the bull market will push the S&P 500 to 5,000 by 2024 from its current 4,400.