- The "AI gold rush" is just getting started for the stock market, according to Wedbush analyst Dan Ives.
- Today's stock market looks more like it did in 1995 than it did in 1999 when the dot-com bubble was popping, he said.
- "The AI revolution [is] just starting to kick in," Ives said.
There is an "AI gold rush" getting underway in the stock market, and it doesn't look like it's going to end any time soon.
That's according to Wedbush analyst Dan Ives, who told clients in a Thursday note that the stock market today looks more like it did during the early stages of the internet boom than when the dot-com bubble popped.
Backing up Ives' view is solid second-quarter earnings for much of the mega-cap tech stocks that have reported results so far. Alphabet, Microsoft, and Meta Platforms all reported earnings results that beat analyst estimates, and all three offered solid outlooks as AI technologies begin to have an impact.
"Big tech earnings has been a flex the muscles moment for the bulls and the fundamental growth stories are now inflecting into [the] second half of 2023 and 2024 with an improving backdrop and the AI Revolution just starting to kick in," Ives said.
He said the AI party is just getting started in the technology sector, and that should help boost Microsoft to a $3 trillion valuation over the next year, representing potential upside of 19% from current levels.
Meanwhile, Alphabet should see more tailwinds in 2024 as digital advertising rebounds and the company releases more AI features for its Cloud unit.
"Talked the talk, now big tech [is] walking the walk," Ives said.
These positive inflection points for big tech earnings are happening at a time when the Fed is at or near its end of hiking interest rates, and as a possible recession appears further out than most expected at the start of this year.
"We believe the backdrop is a risk on environment with tech leading this market higher," Ives said. "The AI gold rush is a '1995 moment' akin to the start of the internet and NOT a 1999/2000 bubble moment."
That thinking lines up with Fundstrat's Tom Lee, who told clients earlier this week that Nvidia would have to soar 10 times current levels to be comparable to the 2000 dot-com bubble.
Part of the bullishness surrounding AI is not just the impact it will have on the technology sector, but also its potential impact on other industries, as a broad range of companies adopt the technology to get more efficient. Increased efficiencies should ultimately translate into higher profits.
And its profit that was the missing key ingredient during the 2000 dot-com bubble, unlike today.