The recent earnings season has made it abundantly clear that the AI revolution is not just knocking on the door but has forcefully entered the tech world.

The impressive results from tech giants such as Microsoft Corp. MSFT, Alphabet Inc. GOOGLGOOG and Amazon.com Inc. AMZN underscored this transition, according to Daniel Ives, an equity analyst at Wedbush.

These companies have reported “eye-popping capital expenditure numbers,” initiating an “AI tidal wave” in software and cloud development driven by generative AI.

“The next phase of AI spending is now on the doorstep for the likes of Salesforce Inc. CRM, MongoDB Inc. MDB, Oracle Corp. ORCL, ServiceNow Inc. NOW, Palantir Technologies Inc. PLTR, Snowflake Inc. SNOW and many others,” Ives wrote.

The expert said companies were “laser-focused on deploying generative AI” across various sectors. Additionally, major players such as Meta and Apple were diving deep into AI, heralding a consumer AI cycle that promised significant spending in the coming years.

Other major players like Meta Platforms Inc. META and Apple Inc. AAPL are diving deep into AI, heralding a consumer AI cycle that promises significant spending in the coming years.

Ives projected AI and related purchases will account for 8%-10% of IT budgets in 2024, a stark increase from less than 1% in 2023. This surge represented a “massive growth catalyst” in what he referred to as the “initial wave of AI software growth.”

Industry-Wide Impact and Consumer Trends

Ives highlighted Nvidia Corp. NVDA and Microsoft as leaders in this burgeoning field, with their influence paving the way for a trillion-dollar spending spree over the next decade.

Recent consumer surveys conducted by Wedbush show “broadly positive” trends for Internet-related groups, with expectations of strong digital advertising growth in 2024.

“Our findings strongly support our expectations for accelerating e-commerce and digital advertising growth in 2024,” Ives said, pointing to bullish indicators for Alphabet, Meta Platforms and Amazon.

Microsoft’s ‘iPhone Moment’

Describing the current phase as Microsoft’s “iPhone moment,” Ives believed AI would significantly alter the cloud growth trajectory for the company in the coming years. “We see an acceleration of adoption for generative AI and Copilot activity,” he explained.

This trend is boosting Azure cloud deal flow for Microsoft, with AI use cases “exploding across the enterprise landscape.” Ives estimated that for every $100 spent on Azure cloud services, there was an additional $35-$40 of AI spending.

Apple’s Foray into AI

Looking ahead, Ives was particularly excited about Apple’s upcoming Worldwide Developers Conference (WWDC), where he anticipates the unveiling of a comprehensive AI strategy.

“We believe Apple is set to unveil its long-awaited AI strategy to its golden installed base and developer community at WWDC,” he said.

This includes a new iPad lineup and the iPhone 16, which are expected to set new standards in AI technology.

“The AI strategy at Apple will consist of an AI App Store that will be the foundational starting point for developers and AI apps,” Ives said.

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