Now is the time to double down on tech stocks as the latest sell-off will be be followed by a 10% rally into year-end, Wedbush says

• Now is the time for investors to take advantage of the 8% sell-off in the Nasdaq and buy tech stocks, Wedbush's Dan Ives said.
• Ives views the current sell-off as short-lived and thinks tech stocks can rally 10% into year-end.
• Wall Street is underestimating the earnings power of the tech sector, he added.
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The 8% sell-off in the Nasdaq 100 doesn't represent an end to the multiyear rally, and is instead a buying opportunity investors should take advantage of, Wedbush analyst Dan Ives said in a Monday note.

Ives pointed to rising yields and stretched valuations as the main drivers behind the current sell-off, but Wall Street is underestimating the earnings power of the tech sector, which represents a golden buying opportunity for investors.

"We continue to believe this pressure on the tech sector is short-lived with our belief that tech stocks will be up 10% into year-end as the tech growth stories are being massively underestimated by the Street with 3Q earnings a major positive catalyst for the tech sector," Ives explained.

Longer term, Ives is more focused on a $2 trillion digital transformation opportunity that is impacting the consumer and enterprise tech ecosystem, rather than a 20-basis-point spike in the 10-year treasury yield, according to the note.

To be sure, the past year and a half pulled forward growth for e-commerce, cyber security, and other facets of the tech sector. But Ives believes there is still huge growth on the horizon that is being underestimated by investors.

"Relative to the outsized growth prospects ahead, this is not the time that we are throwing in the white towel, but rather doubling down on this opportunity to own the secular winners," said Ives.

Those winners Ives is bullish on include the FAANG stocks, with Apple being his favorite, plus cloud names like Microsoft and Docusign, as well as cyber security stocks like Palo Alto Networks and Zscaler, among others.

"While valuations will fluctuate on tech names and some work from home poster [children] like Zoom are coming back to more normalized levels of growth over time, tech segments such as cloud, cyber security, and 5G are poised to see explosive growth rates over the coming years," Ives concluded.