Wedbush analysts anticipate a robust third quarter earnings season for technology companies, driven by strong enterprise adoption of artificial intelligence.
Major cloud providers, including Microsoft Corp (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG), and Amazon.com Inc (NASDAQ:AMZN), experienced significant demand for AI services in the quarter, reflecting growing investment across enterprises and government organizations, the analysts highlighted in a note.
The firm said that while some investors remain cautious about valuations and the pace of AI spending, “the Street is still underestimating how big this AI spending trajectory is” and they expect “Q3 tech earnings to be another validation moment with a doubling down on aggressive initial cap-ex numbers into 2026.”
Wedbush highlighted the scale of the opportunity. “Our bullish view is that investors are still not fully appreciating the tidal wave of growth on the horizon from the $3 trillion of spending over the next 3 years coming from enterprise and government spending around AI technology and use cases,” they wrote.
The analysts described this phase as part of “the 4th Industrial Revolution now playing out around the world led by the Big Tech stalwarts such as Nvidia Corp (NASDAQ:NVDA, ETR:NVD), Microsoft, the Messi of AI Palantir Technologies Inc (NYSE:PLTR), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), Alphabet, and Amazon.”
They see further upside for tech stocks through year-end. “We believe tech stocks will be strong into year-end and could be up another 7%+ into the rest of the year as the next part of this AI Revolution takes hold with upcoming tech earnings season further swaying investors this is a 1996 Moment...and NOT a 1999 Moment,” they wrote.
The analysts pointed to recent investments in Nvidia and Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) by OpenAI as evidence of the growing enterprise AI ecosystem, saying these moves “speak to the capacity buildout and demand drivers happening on the enterprise front which is now creating positive ripples for the 2nd/3rd/4th derivatives of the AI Revolution and speaks to our IVES AI 30 list of tech winners.”
Wedbush emphasized Nvidia and Microsoft as central players in the AI trend.
“The poster childs for the AI Revolution are led by Nvidia and Microsoft as both are foundational pieces of building on the biggest tech trend we have seen in our 25 years covering tech stocks on the Street,” they wrote.
“There is one company in the world that is the foundation for the AI Revolution and that is Nvidia with the Godfather of AI Jensen having the best perch and vantage point to discuss overall enterprise AI demand and the appetite for Nvidia's AI chips looking forward.”
Finally, the analysts highlighted ecosystem effects. “While the first steps in AI deployments are around Nvidia chips and the cloud stalwarts, importantly, we estimate that for every $1 spent on Nvidia, there is an $8-$10 multiplier across the rest of the tech ecosystem.”
“We believe Redmond is seeing a further acceleration in its AI strategy in the field with Azure the star of the show.”