Analysts at Wedbush told investors in a note Friday that the tech year-end rally has begun.
As a result, investors should "get the popcorn ready with Fed fears fading," the analysts wrote in their note.
"Heading into 2024, we believe the tech sector is set up for an acceleration of spending around cloud and AI spending that we believe is being significantly underestimated by the Street," they said.
Wedbush believes that while IT budgets are expected to be up modestly in 2024, cloud and AI-driven spending will be up 20% to 25% over the next year "with use cases now exploding" in the enterprise and consumer landscape.
The Wall Street firm also predicts "a short covering for the ages" for the tech sector into year-end is on the horizon "as the fundamental picture for growth tech stocks is rock solid" based on their recent checks. "We believe the new tech bull market has now begun, and tech stocks are set up for a strong 2024 as the AI spending tidal wave hits the shores of the broader tech sector," the analysts added.
Furthermore, the analysts said they view AI as "the most transformative technology trend since the start of the Internet in 1995" and think many on the Street are underestimating the $1 trillion of AI spending set to happen over the next decade. They described this as a bonanza for the chip and software sectors, looking forward to Nvidia (NASDAQ:NVDA) and MSFT leading the way.
The firm's favorite tech names remain Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Palo Alto Networks (NASDAQ:PANW), Palantir (NYSE:PLTR), Zscaler (ZS), CrowdStrike Holdings Inc. (NASDAQ:CRWD), and MongoDB (NASDAQ:MDB).