Investors in the US and Asia have been continually asking if the tech sector’s robust growth can continue – the answer is a resounding all-caps “YES” from broker Wedbush, primarily due to what it and many others are calling the artificial intelligence (AI) revolution.
This AI wave sweeping across the tech landscape is the most transformational trend since the dawn of the internet, says Wedbush’s media friendly chief analyst Dan Ives.
Advancements in graphics processing units (GPUs) hardware from Nvidia Corp are the easy-to-grasp figurehead for investors at the forefront of this trend.
“For every $1 of spend with Nvidia on GPUs the multiplier around the enterprise and consumer space we estimate could be $10+ over the next few years as this all plays out over the coming years,” gushed Ives in a note to clients.
He likens the current tech evolution to “a 1995 moment,” forecasting $1 trillion in incremental spending over the next decade within the software ecosystem and broader tech sector.
This spending wave, initiated by Nvidia and also being reported by others such as Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD), is expected to generate significant returns, especially as AI applications become increasingly integrated across enterprise and consumer ecosystems.
The focus now shifts to the broader implications of AI for Big Tech companies like Microsoft Inc, Alphabet Inc (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), and Amazon.com Inc (NASDAQ:AMZN, ETR:AMZ) ramping up their AI-related capital expenditures but also seeing their own growth profiles change too, says Ives, along with those for software leaders Salesforce Inc (NYSE:CRM, ETR:FOO), Adobe Inc (NASDAQ:ADBE), Oracle Corp (NYSE:ORCL, ETR:ORC), MongoDB Inc (NASDAQ:MDB), Palantir Technologies Inc (NYSE:PLTR), and others.
“Nvidia and the golden GPUs are the start of the spending wave…not the end and now the Street awaits as a myriad of use cases get built out across the enterprise and consumer ecosystem,” enthused Ives.
“As someone that covered tech stocks during the Dot.com bubble/burst this is nowhere near the 1999/2000 period in our view as the sky high valuations, lack of monetization/ infrastructure, weak balance sheets, froth business models, and macro backdrop was in a totally different world back then compared to what we see today.”
Calls during the recent earnings season highlighted accelerating investments in AI, with Microsoft’s Copilot activity surpassing expectations, further validating the optimistic outlook for AI’s role in tech growth.
Skepticism regarding valuations, especially for companies like Nvidia and Microsoft, means many dogmatic investors have missed a trick, the analyst said.
“We believe investors that have missed the biggest transformational tech stocks the last decade including Amazon, Netflix, Meta, Apple, Alphabet among many others have dogmatically stuck with the forward PE valuation approach on these unique tech stories.”
To wrap up, Ives proclaimed: “For the elite, transformational tech stories such as Nvidia and the AI Revolution investors must see the forest through the trees to where this enterprise spending wave (and estimates) can head over the next 3 years.”
