- Now is the time to double down on technology stocks, according to Wedbush analyst Dan Ives.
- That's despite brewing macro fears of higher interest rates and a hawkish Fed, he said.
- "We focus on this generational AI growth and $1 trillion of tech spending now on the horizon over the next decade."
Investors should double down on technology stocks despite brewing macro fears of higher interest rates and an overly hawkish Federal Reserve, according to Wedbush analyst Dan Ives.
He said in a Wednesday note that bearish investors are "fully out of hibernation mode" and taking advantage of the growing fears on Wall Street.
The 10-year US Treasury yield has surged to 16-year highs over the past month, rising above 4.80% earlier this week. High yields represent competition for risky stocks, as investors can earn risk-free returns of around 5% on cash.
That's not bad considering all of the risks, from a potential recession to a looming government shutdown in November. And investors are taking notice, especially after the Nasdaq 100 fell 7% from its July high.
Bearish investors "will yell fire into a crowded theater again creating agita and panic for the bulls," Ives said.
But it's important that the bulls ignore that panic and instead refocus on buying high-quality tech stocks that are poised to benefit from a ramp up in spending.
"We use the macro and Fed worries as a time to double down on our bullish tech thesis... and NOT panic... We focus on this generational AI growth and $1 trillion of tech spending now on the horizon over the next decade," Ives said.
There are a few tailwinds for tech stocks going forward, aside from the promise of secular growth trends like artificial intelligence, cyber security, and the cloud. Those tailwinds include interest rate cuts from the Fed in 2024, a solid earnings season from tech stocks over the next few weeks, and the possibility of a soft landing in the economy.
"We expect a positive earnings season for big tech which we view as a sneak preview for a major rebound in growth across the tech sector in 2024 with a soft landing backdrop," Ives said.
Finally, he highlighted that macro fears have often hit tech stocks the hardest in the past, but those ended up being great times to buy, not sell, stocks.
"Over the past few decades covering tech stocks we have always used macro jitters, Fed jawboning, and bond vigilantes taking over the narrative as opportunistic times to buy the best quality growth tech stocks and THIS TIME IS NO DIFFERENT," Ives said.
Some of his favorite tech stocks to buy include Apple, Microsoft, Palo Alto Networks, Zscaler, and MongoDB. Ives also has a favorable view of Amazon, Alphabet, and Meta.