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Investing.com--With tech stocks under renewed pressure after a brutal streak on Wall Street, now isn’t the time to run for the exits, but a classic buying opportunity as the foundations of the “AI Revolution” remain firmly intact, Wedbush said in a recent note.
“It’s been a building white-knuckle moment for tech stocks that hit a turbulent moment starting a few weeks ago during earnings season,” Wedbush analysts said, citing high-profile disappointments and escalating bear talk over an AI “bubble.”
This mini panic, however, is likely to be short-lived, the analysts said, as the AI trade remains in the early innings.
“We view this as a short-lived mini panic moment for tech stocks as we believe tech stocks will have a major rally into the rest of the year as investors look to play the AI Revolution,” they added.
A deep dive into third-quarter earnings reveals that underlying drivers from robust cloud results at Microsoft Corporation (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN), and Alphabet Inc Class A (NASDAQ:GOOGL) to a projected step up in capex by Meta Platforms Inc (NASDAQ:META) and other tech leaders are pointing to resilience rather than retrenchment.
Big tech spending on AI infrastructure could surge to $550B to $600B in 2026 from $380B this year, Wedbush forecasts, with names like NVIDIA Corporation (NASDAQ:NVDA) viewed as bellwethers for the AI supercycle.
For every dollar spent on Nvidia, Wedbush estimates an eight-to-ten times amplification effect across the rest of the tech ecosystem, underscoring the conviction that current weakness is more a product of short-run jitters than systemic risk.
While the analysts admit that their bullish call on tech isn’t without risk including economic weakness, tech disruption, and fierce competition, they point to the "AI Arms Race" as reason for optimism, with the groundwork for the next tech rally well underway.