Wall Street is underestimating the inevitable ‘tech bull market’ being lined up by the A.I. Gold Rush, Wedbush’s Dan Ives says

While experts are divided on how artificial intelligence will impact stocks, jobs and the global economy, one tech analyst is doubling down on his view that the A.I. presents a huge opportunity for investors.

Dan Ives, an analyst at Wedbush, said in a note to clients on Monday that thanks to the A.I “Gold Rush,” tech stocks would be heating up in the second half of this year.

“A.I. has changed the tech world and investor sentiment,” he said, labeling the technology’s impact on markets as “an Internet Moment.”

Ives stressed, however, that the A.I. hype was akin to a “1995 Internet Moment” rather than a 1999 dotcom bubble moment—referring to the tech bubble that burst after investors poured money into internet-focused companies.

“The 2nd, 3rd, and 4th derivatives of this A.I. Gold Rush are just starting to evolve for the tech landscape,” Ives wrote. “As we have covered the tech sector for decades and saw the dot.com bubble and burst firsthand, [we believe] this is the start of a 4th Industrial Revolution playing out across tech over the coming years that is still being underestimated by the Street in our opinion.”

In an interview with CNBC on Wednesday, Ives added that he “does not believe that this is a hype cycle.”

Wedbush has projected that by 2024, A.I. could account for up to 10% of overall IT budgets versus around 1% in 2023. Software-based A.I. spending will become a “laser focus” of CIOs around the globe, Ives predicted.

He added: “In a nutshell, there will be winners and losers in tech, but ultimately we see a strong 2H ahead for the tech sector. While bears will continue to fret about tech valuations and the uncertain macro backdrop, we believe this ultimately is the start of a new tech bull market we see heading into 2024 being driven by this A.I. revolution coupled with a stabilizing IT spending environment.

Ives has previously declared the A.I. boom another internet moment, bucking some investors’ concerns that the tech is forming a market bubble that will inevitably burst in a separate note sent earlier this month.

Since OpenAI’s ChatGPT generative A.I. chatbot became a phenomenon with users all over the world in late 2022, Big Tech has amped up its own efforts in the space, with Microsoft, Google, Amazon and Baidu competing to offer the best competitor.  

Broader tech rally

Because of the huge, rapid investments being made in A.I., the unexpected tech rally that has unfolded so far this year will continue to an even greater extent throughout the rest of the year, Ives said in Monday’s note.

“Heading into the second half of 2023, we see a much broader tech rally ahead as investors further digest the ramifications of this $800 billion A.I. spending wave on the horizon and what this means for the software, chip, hardware, and tech ecosystem over the next year,” he wrote.

“We believe overall the tech sector will be up another 12% to 15% in the second half of this year led by software and the chip sector, with Big Tech remaining the ‘torch bearer’ for this tech rally continuing to heat up.”

While Ives noted that “many will benefit in this A.I. Arms Race,” he named a slew of companies that were likely to make major investments in the technology and therefore be beneficiaries of the “immense monetization opportunity” it represented.

“With Microsoft a clear market leader in the A.I. race along with Nvidia, this battle will be a long one over the next decade as we expect other technology companies besides Google, such as Oracle, Amazon, Salesforce, Palantir, MongoDB, Apple, IBM, Meta, Adobe, Snowflake, C3.ai, and other tech stalwarts along with smaller players in the industry, to collectively spend tens of billions over the coming years,” he predicted.

“We believe that Microsoft is in a unique position to gain share in the cloud market that could expand Redmond’s total addressable market around cloud by 35% to 40% over the coming years.”

A.I. hype divides investors

Ives clearly isn’t the only market watcher to believe that the hype around A.I. is justified.

Last month, buzz around A.I. chips saw investors pouring cash into Nvidia shares, pushing the company into the elite “trillion dollar club”—which counts Apple, Microsoft and Google parent firm Alphabet among its members.  

Ives previously predicted that Microsoft’s investment in ChatGPT could see the tech giant enjoy a similar boost to its valuation.

Meanwhile, a French A.I. firm took advantage of the hype around the tech earlier this month to raise a record $113 million just weeks after being founded—despite having no product ready and only just taking on staff.

Other investors have taken a far more cautious approach to jumping on the A.I. bandwagon.

Hedge fund billionaire Ken Griffin warned in recent weeks that the A.I. community is making a “terrible mistake” by spreading hype around the technology, while ARK Invest’s Cathie Wood declared that Nvidia’s shares were “priced ahead of the curve” thanks to A.I. excitement.

Meanwhile, veteran investor James Penny, CIO of TAM Asset Management, warned recently that the A.I. hype was starting to “smell like the dotcom era.”

When it comes to A.I.’s wider impact on humanity, business leaders, technologists, and A.I. experts are divided on whether the technology of the moment will serve as a “renaissance” for humanity or the source of its downfall.

At the recent invitation-only Yale CEO Summit, 42% of CEOs surveyed at the event said they believed A.I. has the potential to destroy humanity within the next five to 10 years.

It isn’t just CEOs who are concerned about what rapidly developing artificial intelligence might unleash upon the world.

Back in March, 1,100 prominent technologists and A.I. researchers, including Elon Musk and Apple cofounder Steve Wozniak, signed an open letter calling for a six-month pause on the development of powerful A.I. systems.

Three famous A.I. pioneers nicknamed the “godfathers of A.I.” are also divided on whether super intelligent computers will bring about the end of mankind.

Two of these three so-called godfathers have, in light of the recent buzz around the technology, publicly stated that they are fearful about artificial intelligence being misused, while the third has called the concept that A.I. will wipe out humans “preposterously ridiculous.”