Investors should buy technology stocks ahead of a year-end rally, according to Wedbush’s Dan Ives.
Ives said Friday that the combination of solid second-quarter earnings and a less hawkish Fed should boost stock prices.
“With the Fed waving the white flag on rate hikes, we see a green light risk-on environment into year-end,” Ives said.
The combination of solid second-quarter earnings results and a less hawkish Federal Reserve means investors should start buying technology stocks, according to a Friday note from Wedbush analyst Dan Ives.
Ives argued that the ongoing pull-back in technology stocks, which send the Nasdaq 100 down about 6% from its recent high, represents a buying opportunity for long-term investors that want to get positioned for the next bull market.
“We firmly stick with our bullish call that a 12% to 15% [rally] in tech stocks will be in the cards heading into year-end as the new tech bull market has begun,” Ives said.
Ives’ confidence stems from better-than-expected second-quarter earnings results from tech stalwarts like Amazon, Microsoft, and Apple, among others, as well as the growing demand for artificial intelligence technologies.
“AI remains in the spotlight-driving success for some and headwinds for others. From the hundreds of conference calls we listened to over the past month its clear that the AI theme is changing the enterprise and consumer landscape going forward and creating a bifurcated spending environments for the winners and losers in this backdrop,” Ives explained.
Ives pointed to companies in the cloud, cyber security, and digital advertising sectors that should experienced continued tailwinds from the advent of artificial intelligence, akin to what happened with the internet in 1995.
“Rome was not built in a day, and neither will the AI ecosystem but let’s be clear this build out is unlike anything we have seen since the Internet in 1995 and the ramifications are just starting to ripple through the consumer/enterprise landscape,” Ives said.
That strength in AI should help boost technology stocks, as should a less hawkish Fed. The July CPI report showed inflation continues to cool down, and that should allow the Fed to pause its interest rate hikes for good at the upcoming September FOMC meeting. Some even expect the Fed to cut interest rates early next year.
“With the Fed waving the white flag on rate hikes, we see a green light risk-on environment into year-end and believe we are only in halftime of this new tech bull market raging into the next 12 to 18 months,” Ives said.
A 15% surge in the Nasdaq would send the index to levels not seen since the end of 2021.
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