Investing.com -- The rally in tech stocks isn't likely to end anytime soon as the upcoming quarterly earnings season will highlight the next phase of the artificial intelligence revolution beyond just the hardware needed to power AI, adding extra muscle to the current bull run.
"We believe 1Q earnings will be a major positive catalyst for the tech sector and expect tech stocks to be up another 15% for the year adding to the strong start to 2024," Wedbush analysts, led by Daniel Ives, said in a note.
The tech growth story seen in the current bull market run has been driven by the promise of the AI, with much of the focus on the hardware including semiconductors to provide the compute power needed to build AI models such as ChatGPT. While the hardware makers, mostly Nvidia (NASDAQ:NVDA), have been scooping up the AI investment dollars, the next gear of growth for this coveted technology now beckons: the software phase.
Enterprise spending on AI and related purchases will likely rise to 8% to 10% in 2024, Wedbush estimates, dwarfing the less than 1% seen in 2023, ushering in wave of dollars that will likely benefit companies in key areas including software, cybersecurity, digital advertising, and semis of the AI value chain.
Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc Class A (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN), Palantir Technologies Inc (NYSE:PLTR), Meta Platforms Inc (NASDAQ:META) with our favorite cyber security names Zscaler Inc (NASDAQ:ZS), CrowdStrike Holdings Inc (NASDAQ:CRWD), Palo Alto Networks Inc (NASDAQ:PANW), Cyberark Software Ltd (NASDAQ:CYBR), Checkpoint Therapeutics Inc (NASDAQ:CKPT), and Tenable Holdings Inc (NASDAQ:TENB) are expected to be standout performers in the upcoming Q1 earnings season, Wedbush said.
"We see many incremental budget dollars now going to the software/build out phase of AI which should be a major focal topic on the upcoming 1Q conference calls," it added.
Microsoft, however, is likely to stand head and shoulders above the rest as demand for its Azure cloud platform will be spurred by an acceleration in the adoption of generative AI and Microsoft Copilot as AI use cases expand, adding another $25B to $30B, Wedbush estimates, to the tech giant's revenue by 2025.