Source: Finance Association
① Wedbush said that the recent sell-off in technology stocks is a new buying opportunity for investors; ② technology companies' performance in the first quarter is expected to be strong as the artificial intelligence boom continues; ③ the bank anticipates that a strong earnings season may eventually drive the sector up 15%.
US investment bank Wedbush said that after the recent decline, technology stocks will once again be strongly sought after. He believes that a bright corporate earnings season may push technology stocks to achieve double-digit growth again before the end of the year.
Wall Street investment sentiment worsened last week, and technology stocks followed the general market decline.$Nasdaq Composite Index (.IXIC.US)$It fell 0.6%, as traders saw an unusually hot CPI report, and expectations for the Fed to cut interest rates declined. According to the CME Federal Reserve's observation tool, the inflation level in the past three months was higher than expected, causing investors to reduce the possibility of interest rate cuts in June to around 20%.
According to AAII's latest investor sentiment survey, only 43% of respondents said they are optimistic about the stock market in the next six months. Concerns about a recession have also increased, as high interest rates may cause the economy to contract too much and fall into recession. According to the Federal Reserve Bank of New York's latest estimates, there is a 58% chance that the US will fall into recession by March 2025.
Meanwhile, on Monday, the Nasdaq Composite Index, which is dominated by technology stocks, fell 1.79% to 15,885.02 points due to the escalation of the situation in the Middle East and higher US bond yields.
However, Wedbush strategists, led by Dan Ives, said that the profit environment for tech companies still seems strong, especially considering that the AI boom that once drove tech stocks to skyrocket continues. The strategists added that a strong earnings season could be a major positive catalyst for tech stocks, and they expect tech stocks to soar another 15% by the end of 2024.
“We believe that the recent safe-haven environment and tech sell-off provides clear buying opportunities for the upcoming tech stock earnings season.” They wrote in their latest report, “Although high CPI, weak bank earnings, and geopolitical concerns are putting pressure on the stock market, we should now focus on the upcoming earnings season for key technology stocks. We think this season will be strong across the board.”
According to a consumer survey conducted by Wedbush, consumer spending trends for internet companies were “strong” in the first quarter. They added that the growth in digital advertising is also expected to be strong, which will become$Alphabet-A (GOOGL.US)$/$Alphabet-C (GOOG.US)$,$Amazon (AMZN.US)$und$Meta Platforms (META.US)$Other favorable factors for the company.
Meanwhile, AI spending is expected to account for 10% of corporate IT budgets this year.$Microsoft (MSFT.US)$und$Palantir (PLTR.US)$It will be a boon for companies. Wedbush strategists expect 1 trillion US dollars of artificial intelligence spending to affect the industry in the next 10 years. After the first wave since last year, there will be a second, third, and fourth wave of shocks in the next few years.
“We have carried out numerous field checks around the world over the past month, which gives us great confidence that the monetization of the AI revolution has now begun to enter the next phase of growth, as the baton has been transferred from semiconductors to the software stage, and use cases have exploded.” The report added.
editor/tolk