Wall Street is significantly underestimating the impact of artificial intelligence (AI) spending among the technology blue chips.
That is according to analysts at Wedbush, who today put their chips on a 2024 tech rally driven by a 20% to 25% increase in cloud computing and AI spending.
“Heading into 2024 we believe the tech sector is set up for an acceleration of spending around cloud and AI spending that we believe is being significantly underestimated by the Street,” they commented.
The positive impact of AI monetisation is becoming increasingly evident among tech giants like Microsoft, Datadog, and Palantir, who have all reported strong results recently, underscoring the rapid expansion of AI applications.
"AI is the most transformative technology trend since the start of the Internet in 1995," Wedbush analysts remarked, highlighting the potential for a US$1 trillion AI spend over the next decade.
As such, and despite macroeconomic uncertainties and Federal Reserve policies impacting tech stocks, Wedbush views these times as opportunities to invest in high-quality tech stocks, with top picks including Apple, Microsoft, Google, Palantir, Zscaler, Crowdstrike and MongoDB.
The macro story is overshadowing the biggest technology revolution in the last 30 years with AI a "1995 Moment", the analysts said.
Wedbush contended that the AI cycle is set to dramatically transform the consumer internet sector, starting with cloud service divisions like Amazon’s AWS and Alphabet’s GCP.
Apple’s China exposure overstated
Contrary to popular belief, Apple's exposure to China is not as detrimental as perceived.
Wedbush points out that the "iPhone China demise narrative" has been exaggerated, with mainland China growth remaining robust.
"Apple remains our top tech pick with a strong iPhone 15 upgrade cycle playing out," the analysts concluded, highlighting Apple's resilience and growth potential.