It is hard to escape talk of an AI bubble. Yet Wedbush insists we are still in the foothills of what it calls an “AI capex super cycle”.
The broker argues that rather than a replay of the dotcom bust, today looks more like 1996, with the real growth spurt still ahead.
The point is simple. Big Tech is pouring money into artificial intelligence infrastructure and others are now joining the party. Wedbush estimates almost $350 billion of capital spending by US technology giants this year, with governments in the Middle East and the UK starting to follow suit.
Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and Google remain at the centre, but the ripple effect is spreading across chips, software and data centres.
Nvidia Corp (NASDAQ:NVDA, ETR:NVD) is singled out as the prime beneficiary, with demand for its graphics processors continuing to exceed expectations.
But Wedbush also highlights names such as Palantir, which it says could reach a $1 trillion market capitalisation in two to three years as enterprises look for ways to deploy AI at scale.
The worry for some is that valuations already look stretched. Wedbush counters that investors who focused narrowly on near-term earnings multiples would have missed out on every major technology growth story of the past two decades.
With chief information officers racing to avoid being left behind, the analysts see trillions of dollars of additional investment still to come and believe the technology bull market has at least another two to three years to run.