Investors will have reason to be cautious about tech stocks: the sector has posted big gains this year, and interest rates are still likely to rise. Fret not, say analysts at Wedbush, because the artificial intelligence-led rally may continue.
While the Fed is widely expected to keep interest rates on hold when it meets this week, expectations for November are volatile with another rate hike on the table, making it unlikely to change bets on when borrowing costs will finally fall.
The problem for tech investors is what the Fed’s policy has done to peg yields, while the benchmark 10-year U.S. Treasury yield remains above 4%, the highest level since the 2008-2009 financial crisis. The high yields of risk-free government debt give investors less incentive to pile on risky bets on stocks like technology stocks.
However, analysts led by Dan Ives continue to trumpet Wedbush – the famous tech bull.
“Could Technology Rise at a Stubborn 4%+ 10-Year Rate?” The team at Wedbush wrote in a note Tuesday. “While the Street has recently focused on the Fed, we believe tech stocks will be in a new tech bull market until the end of the year, even if it finally starts waving the white flag with rate cuts on the horizon in 2024. “
It’s all about AI, say Ives and his team. Optimism about transformative technology is a key driver of the tech sector’s surge in 2023, and analysts see a new phase of the rally coming.
“The rocket ship-like trajectory of AI-driven growth at the edge of the tech industry over the next 12-18 months speaks to our continued bullishness for tech stocks,” said a Wedbush analyst. We’ll dive into the next AI costs with high-level players.
Microsoft
,
Google and
Amazon
It is poised to benefit from the ongoing high enterprise spending.
Wedbush predicts growth in software, chips and digital media will continue to evolve over the next year, with the impact of the AI cycle on the consumer internet starting with cloud service providers.
Amazon
(symbol: AMZN) and
Alphabet
(GOOGL)
These two names with the social media giant’s AI player
Meta forums
(Meta), with excellent ratings and high price targets, are Ives’ preferred technology games. Wedbush sees Amazon shares hitting $180 — down from $140 on Monday
Alphabet
Stock rose from $138 to $160 and meta rose to $350 from below $303.
But other stocks should also benefit, with Wedbush holding outperform ratings on names including the Wall Street darling, the AI-prone chipmaker.
Nivea
( NVDA ), which analysts had forecasted rose to $600 a share from $440 a share. A technology giant and cloud service provider
Microsoft
(MSFT), also, is on tap to rally, to $400 from $329.
As noise over the Fed’s decision — and the outlook for prices and yields — is likely to reach fever pitch this week, Wedbush’s strong tech bulls could be one more reason for investors to calm down.
Write to Jack Denton at [email protected]
