Tech stocks should rise 20% plus in 2024 as the tech sector is set up for an acceleration of spending around cloud and AI that is still being significantly underestimated by Wall Street, according to Wedbush analysts.
In an update to clients, the analysts noted that they believe cloud and AI driven spending will be up 20%-25% over the next year and think "a short covering for the ages" for the tech sector into year-end is well underway.
"We believe now the rest of the tech sector joins the Magnificent 7 in this rally into 2024 with AI tailwinds abound," the analysts wrote.
They also believe many on Wall Street are still underestimating the $1 trillion of AI spend set to happen over the next decade that will be "a bonanza" for the chip and software sectors with Nvidia and Microsoft leading the way.
Analysts at Wedbush added that the impact of the AI cycle on consumer internet will be "massive" and it will start with the cloud service divisions, Amazon’s AWS and Alphabet’s GCP.
Their favorite tech names remain Apple, Microsoft, Google, Palo Alto, Palantir, Zscaler, Crowdstrike, and MongoDB.
Apple, however, is their top tech pick with a strong iPhone 15 upgrade cycle playing out into a strong holiday season, which "appears humming into Christmas week".
The analysts believe the iPhone maker’s Services business alone is worth between $1.5 trillion to $1.6 trillion on a standalone basis.