The stage is set for tech stocks to move higher into the year-end as NVIDIA Corp (NASDAQ:NVDA, ETR:NVD)'s earnings report and management commentary last week was the “missing piece” for the AI revolution bull thesis, analysts at Wedbush believe.
Shares of NVIDIA traded down 7.8% at $110 in the early afternoon on Tuesday after investors spent the long weekend weighing up the chipamaker's underwhelming profit guidance.
“While the initial reaction to these robust earnings/guidance from the Godfather of AI Jensen and NVIDIA was muted, we believe the underlying enterprise demand for AI is way outstripping supply and with Blackwell delay fears allayed we do not see anything getting in the way of this AI Revolution heading into year-end,” analysts wrote in a note to clients.
They see AI starting with NVIDIA but the broader ramifications for the tech sector as a “4th Industrial revolution” being built out across semis, software, infrastructure, Internet, and smartphones over the next 12 to 18 months.
Joining NVIDIA as a core driver of AI is Microsoft, with other tech stalwarts also playing a part including Oracle, ServiceNow, Palantir, Salesforce, Dell, IBM, Apple, and AMD among others.
Wedbush’s analysts continue to estimate that for every $1 spent on an NVIDIA GPU chip, there is a $8 to $10 multiplier across the tech sector, which supports their “firmly bullish view” of tech stocks over the next year.
“Taking a step back, Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape with its chips powering the AI Revolution and being the only game in town for now,” they wrote.
Analysts noted that even though competitors such as AMD are ramping up, there is essentially $1 trillion in AI capital expenditure coming for NVIDIA over the next few years.
“The cloud numbers and AI data points from Redmond, Amazon, and Google were very strong during earnings season the last few months as this indicates massive enterprise AI demand is now underway which was further confirmed by NVIDIA and the Godfather of AI last week and is a major bullish data point for the broader tech sector into year-end,” they wrote.