Analyst Eyes $1T AI-Driven Opportunity with Alphabet, Amazon, and Meta Leading the Charge

Wedbush analyst Daniel Ives had an Outperform rating on Big Tech titans including Nvidia Corp NVDA, Amazon.Com Inc AMZN, Alphabet Inc GOOG GOOGL, Meta Platforms Inc META, Salesforce, Inc CRM and Microsoft Corp MSFT.

Last week was an action-packed week for the markets as Nvidia delivered jaw-dropping guidance based on its unprecedented AI demand. 

At the same time, Fed Chair Jerome Powell gave a murky speech at Jackson Hole with the Street still trying to gauge the next poker move out of the Fed. 

Nvidia's stock sold off post-print despite the euphoria. The lingering worry among investors is if the market and overall tech sector are essentially range-bound with a 10-year Yield stuck over the critical 4% threshold. 

The analyst believes tech go higher with a 4% 10-year level as he sees tech stocks rallying into year-end as the new tech bull markets power through near-term Fed worries. 

The analyst said the Nvidia guidance (despite the modest sell-off post-print) speaks to a tidal wave of AI-driven spending on the horizon for the tech sector over the coming years. 

The analyst does not expect Microsoft, Salesforce, or Oracle Corp ORCL, among others, to report comparable quarterly earnings like Nvidia.

Nvidia's rocket ship-like trajectory of AI-driven growth that will hit the shores of the tech industry over the next 12-18 months speaks to his unabated bullishness for tech stocks. 

Ives sees improved spending for software, chips, and digital media consumer growth into 2024. 

Investors now recognize that this AI demand story is real. Today, Nvidia is on the front line supplying the GPU and chips. 

Still, ultimately, the most important takeaway is that transformational AI growth is coming to software, chips, and digital media over the coming years, with $1 trillion of spending in clear sight for the tech sector. 

Investors need a 3-year view of where these growth stories go, the incremental margins and cash flow to the models down the road, how the growth story changes, and the sum of the parts valuations.

The impact of the AI cycle on consumer Internet will be massive, and it will start with the cloud service divisions, Amazon.Com Inc's AMZN AWS and Alphabet Inc's GOOG GOOGL GCP. 

AWS and GCP acquire AI-capable chips, build AI-capable service offerings, and sell those services into their installed bases. 

Those customers, including Amazon Retail and Google Search, adopt AI-enabled services to build capabilities into their existing consumer offerings.

He continues to like Amazon, Alphabet, and Meta Platforms Inc META as his favorites on this theme.