Artificial intelligence (AI) has the potential to reshape most areas of the US economy, and this prospect has driven the rise of technology stocks for most of this year, until the trend gradually subsided this autumn.
But Dan Ives, an analyst at Wedbush, a US investment bank, warns that if investors believe that the ability of artificial intelligence to improve returns is over, it would be a big mistake.
Ives has always been known for being optimistic about the technology industry. He said that people's expectations for the impact of AI on various fields are generally too low, and he expects the "wave" of artificial intelligence applications to drive the stock prices of companies such as Apple up nearly 30% next year.
He wrote in a research report, "We believe that artificial intelligence is the most revolutionary technological trend since the birth of the Internet in 1995, and many on Wall Street underestimate the $1 trillion in AI spending that will occur in the next decade, which will bring substantial returns to the chip and software industries
Despite the uncertain macroeconomic background - the Federal Reserve raised interest rates and the yield of treasury bond bonds soared, technology stocks still successfully led the market higher this year, as investors flocked to companies with strong balance sheets that could withstand potential economic downturn.
At the same time, the hype about artificial intelligence and cloud computing has also prompted investors to snap up stocks of companies that are expected to become winners in the growing trend. The Nasdaq 100 index surged by over 42% in 2023, surpassing the nearly 15% increase of the S&P 500 index.
Ives stated that there are already signs that monetization of artificial intelligence has begun to affect the technology industry. He pointed out that the recent robust quarterly results released by Microsoft Corp., Datadog Inc., and Palantir Technologies Inc. show that new methods of utilizing artificial intelligence are exploding in the enterprise and consumer sectors.
In addition to Microsoft and Palantir, Wedbush's top choices in this field include Apple, Google's parent company Alphabet, network security company Palo Alto Networks, cloud computing security company Zscaler, computer security technology company CrowdStrike, and developer data platform MongoDB.
Nevertheless, there are still signs that investors may hold a reserved attitude - the Nasdaq 100 index has struggled to recover from its 2023 peak set in July and is still below its 2021 level.
However, Ives stated that as the fundamentals of growth in the industry remain 'rock solid', 'long-term short covering' may occur. He said that now is a good time to buy, and technology stocks are expected to soar again in 2024.
We always take advantage of macro market nervousness, lobbying from the Federal Reserve, and the opportunity for 'bond volunteers' to occupy the market to buy the best quality growth technology stocks. This time is no exception, "he added.