Tech stocks are poised for a double-digit rally by year-end, followed by an even stronger bull run in 2025, Wedbush analysts said Sunday.
After spending several weeks in Asia, Wedbush said it has grown even more confident in its “AI Revolution” demand thesis. The firm highlights unparalleled demand in the supply chain for AI chips, led by Nvidia (NASDAQ:NVDA).
Analysts say this surge in demand is driving a significant increase in enterprise spending as AI use cases expand across industries. They estimate the overall AI infrastructure market could grow tenfold by 2027, with $1 trillion in AI capital expenditures expected over the next three years.
Wedbush sees this wave of tech spending is seen as a major tailwind for well-positioned companies in semiconductors, software, infrastructure, and cybersecurity, as more generative AI-driven models become central to enterprise operations.
“We continue to see AI projects and strategic initiatives get top priority within many enterprise IT budgets for 2025 which we believe is on the doorstep of seeing a major phase of software-driven growth as the "AI use case phase" becomes front and center for CIOs,” analysts said in the note.
While Nvidia and Microsoft (NASDAQ:MSFT) remain the leading players in AI, they also note that other major tech companies are driving the AI revolution, including Oracle (NYSE:ORCL), ServiceNow (NYSE:NOW), Palantir (NYSE:PLTR), Salesforce (NYSE:CRM), Dell (NYSE:DELL), IBM (NYSE:IBM), Apple (NASDAQ:AAPL), AMD (NASDAQ:AMD), and others.
“In a nutshell we believe the stage is set for tech stocks to move 10%+ higher into year-end and another 20% in 2025 with this tech bull market just hitting its next phase led by the AI Revolution,” analysts continued.
“In our opinion as the Fed and Powell have kicked off its aggressive rate cutting cycle, macro soft landing remains the path, and tech spending on AI remains a generational spending cycle just starting to hit the shores of the tech sector,” they added.
Wedbush believes the market is underestimating the ripple effects of the transformational AI-led tech spending trend. The firm expects the margin and growth benefits from AI to serve as a key catalyst for driving tech stocks higher into 2025.
Also, while volatility is possible leading up to the U.S. Presidential Election, Wedbush analysts anticipate a “very strong Q3 tech earnings season.”