A sharp sell-off in leading technology stocks reflects short-term impatience rather than any breakdown in the artificial intelligence trade, according to Wedbush.
The broker said core names driving what it calls the fourth industrial revolution, including Microsoft Corp (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOG), Palantir Technologies Inc (NYSE:PLTR), Oracle Corp (NYSE:ORCL, XETRA:ORC), Nvidia Corp (NASDAQ:NVDA, XETRA:NVD), Amazon.com Inc (NASDAQ:AMZN) and Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB), have come under heavy selling pressure, with investors treating Microsoft and Meta as if they were bear-market stocks that cannot be owned.
Wedbush, whose technology team is led by Dan Ives, said the moves amounted to a "Twilight Zone market" for many of the sector's biggest names, while beneficiaries such as memory chipmakers were thriving.
Micron Technology Inc (NASDAQ:MU) was singled out as one such winner over the past week.
The bank put the disconnect down to two main concerns weighing on the hyperscalers and Nvidia.
The first is the lag between Big Tech's enormous capital spending and any payoff in revenue.
Wedbush estimates the largest technology companies will spend around $700 billion on capital expenditure this year to build out AI infrastructure, leaving the sector in what it described as an "air pocket stage".
The broker said investors had grown frustrated with the patience required on Microsoft and Meta in particular, with the two now in a six to 12 month window during which data centre and compute buildouts are ramping up but the expected monetisation boom has yet to arrive.
Alphabet had been the standout performer in the group until recent weeks, when it lost several core engineers to Anthropic.
Meta, meanwhile, is attempting to overhaul its business through heavy investment that will take time to feed through to earnings.
Wedbush framed the situation as year three of a 10-year AI buildout, arguing the current weakness represented short-term pain for long-term gain and that the stocks now offered major buying opportunities.
The second concern centres on rising compute and memory costs, and whether they could reach a level that forces enterprises to slow their AI buildouts.
Wedbush said Apple Inc (NASDAQ:AAPL, XETRA:APC) price increases announced the previous day had sent a negative jolt through the market, feeding wider worries about the neoclouds and hyperscalers being left exposed in a game of musical chairs.
The broker expects those costs to ease over the coming year.
It argued that the present anxieties would fade once AI consumer hardware, physical AI deployments and enterprise use cases scaled up, comparing the buildout to the construction of the Las Vegas strip in the 1950s.
Wedbush concluded that the head-scratching moves across the sector were creating disconnects and opportunities to own the technology and AI winners in a multi-year bull market it believes still has considerable room to run.