Analysts at Wedbush see the rally in tech stocks continuing into 2024 led by artificial intelligence (AI).
In a note to clients, the analysts wrote that they believe the latest pullback in tech stocks was just a brief pause before the rally resumes in full force post-Labor Day heading into year-end.
“Growth prospects of the tech sector are now on the cusp of a massive wave of software and chip spend being driven by AI use cases exploding across the globe,” they wrote.
“We firmly stick with our bullish call that a 12% 15% increase in tech stocks will be in the cards heading into year-end as the new tech bull market has already kicked off in our opinion. Most importantly enterprise cloud spending and hyperscale projects have been strong as seen by the likes of Microsoft Corporation (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN), and Google (Alphabet Inc (NASDAQ:GOOG)) during 2Q earnings as the acceleration to the cloud gains steam on the heels of this AI Revolution.”
They added that investments in AI would unleash an unprecedented wave of spending, with AI potentially comprising up to 10% of IT budgets in 2024.
“From the hundreds of conference calls we listened to over the past month, it's clear that the AI theme is changing the enterprise and consumer landscape going forward and creating a bifurcated spending environment for the winners and losers in this backdrop,” they wrote.
“Based on our recent checks we believe AI could comprise 8% to 10% of IT budgets in 2024 up from less than 1% of budgets in 2023, speaking to the unprecedented massive shift now happening across the enterprise and consumer landscape.”
Positive on iPhone 15 launch
Meanwhile, the analysts noted that the slowdown in China’s economy was not a concern when it comes to the Apple Inc (NASDAQ:AAPL) iPhone 15 release, with their latest checks around the September launch “incrementally positive.”
We believe a 75%/25% heavier Pro mix shift is now in the cards which is a positive for average selling price (ASP) and a nice tailwind for Apple into this "mini supercycle" launch,” they wrote.
“We also expect a $100 to $150 price increase on the iPhone 15 Pro/Pro Max version which after major carrier promotions should be digestible to many upgrade customers; which we estimate represents ~240 million iPhones worldwide that have not upgraded in 4+ years.
They forecast initial sales to be modestly higher than the iPhone 14, with China demand remaining strong despite lingering growth concerns on the Street.
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