US investment bank Wedbush has stated that after the recent decline, technology stocks will once again be strongly sought after. He believes that a bright corporate earnings season may drive technology stocks to achieve double-digit growth again before the end of the year.
Last week, investment sentiment on Wall Street deteriorated, with technology stocks falling along with the overall market. The Nasdaq Composite Index fell 0.6% as traders saw an unusually hot CPI report, leading to lower expectations for the Federal Reserve's interest rate cut. According to the CME Federal Reserve observation tool, inflation levels in the past three months have been higher than expected, leading investors to reduce the likelihood of a rate cut in June to around 20%.
According to the latest investor sentiment survey by AAII, only 43% of respondents expressed optimism about the stock market in the next six months. Concerns about economic recession have also increased, as high interest rates may lead to excessive economic tightening and recession. According to the latest estimate from the Federal Reserve Bank of New York, the likelihood of the United States falling into recession by March 2025 is 58%.
On Monday of this week, due to the escalation of the Middle East situation and the rise in US bond yields, the Nasdaq Composite Index, mainly composed of technology stocks, fell 1.79% to close at 15885.02 points.
But Wedbush strategists led by Dan Ives say that the profit environment for tech companies still looks strong, especially considering the ongoing AI boom that once drove tech stocks to soar. Strategists added that a strong financial reporting season may become a major positive catalyst for technology stocks, and they expect them to soar another 15% by the end of 2024.
"We believe that the recent safe haven environment and technology stock sell-off have provided clear buying opportunities for the upcoming technology stock earnings season." They wrote in their latest report, "Despite the pressure on the stock market from high CPI, weak bank profits, and geopolitical concerns, the focus should now be on the upcoming key technology stock earnings season, which we believe will be comprehensively strong."
According to the consumer survey conducted by Wedbush, the consumer spending trend of Internet companies in the first quarter was "strong". They added that the growth of digital advertising is also expected to be strong, which will be a positive factor for companies such as Alphabet, Amazon, and Meta.
At the same time, artificial intelligence spending is expected to account for 10% of enterprise IT budgets this year, which will be a blessing for companies such as Microsoft and Palantir. Wedbush strategists predict that $1 trillion in artificial intelligence spending will affect the industry in the next 10 years, with second, third, and fourth waves of impact in the coming years following the first wave of market activity since last year.
"In the past month, we have conducted numerous on-site inspections worldwide, which gives us great confidence that the monetization of the artificial intelligence revolution has now entered the next growth stage, as the relay baton has been transferred from the semiconductor phase to the software phase, with a comprehensive outbreak of usage cases," the report added.