Wedbush analysts said that Wall Street continues to underestimate the impact of the ongoing AI revolution on the technology sector.
One of the current debates among investors is about whether AI will primarily benefit a handful of tech giants or it will extend its advantages to the broader sector in the coming years.
“We believe many investors still remain very skeptical around the ultimate financial impacts of generative AI to Street estimates in 2024/2025 and so far the bread crumbs around the transformative AI growth are only seen in the numbers and metrics of Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), and Palantir,” analysts wrote in a Monday note.
The robust performance of technology companies this year, alongside earnings that reinforce a bullish outlook, means that any minor downturns in stocks such as Nvidia (NVDA), as seen on Friday, will “have the bears come out of their caves in hibernation mode and yell "the bubble is about the pop”,” analysts said.
“Lets be clear: we have covered tech on the Street since the late 90's and this is NOT a bubble but instead the start of a 4th Industrial Revolution now on the doorstep that will have major growth ramifications for the tech sector led by the software/use case phase in motion,” they noted.
Wedbush believes that this is just the beginning of a journey into a $1 trillion AI market opportunity that will sweep across the tech sector in the next few years. This revolution, as analysts call it, is expected to be led by the enterprise market, with consumer use cases from major players like Apple (NASDAQ:AAPL), Meta, Google (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN) to follow suit in the near future.
“As we see the spending/AI use cases in the field our conviction on our tech bull thesis is increasing in this 1995 Moment....NOT a 1999 Bubble Moment,” analysts concluded.