Wall Street is still underestimating the AI boom, and investors can expect tech stocks to soar 20% next year, Wedbush says

• Wedbush strategists said Monday that Wall Street is still underestimating the artificial intelligence boom.
• Cloud and AI-driven spending can fuel the tech sector into a new bull market in 2024, in their view.

Wall Street has been fixated on artificial intelligence-related stocks all year, but according to Wedbush, the market is still largely underestimating the transformative potential and huge spending spree that the technology will bring.

In a note Monday, strategists led by Dan Ives forecasted that tech stocks are poised to surge in 2024 as companies ramp up resources dedicated to AI and cloud technology. Spending in those two areas, in Wedbush's view, will outpace budgets within the IT space.

"We believe the new tech bull market has now begun and tech stocks are set up for a strong 2024 with tech stocks we expect to be up 20%+ over the next year led by Big Tech as the AI spending tidal wave hits the shores of the broader tech sector," Ives wrote.

Wedbush likened the impact of AI on business and technology to that of the internet, and the strategists said AI is in its "1995 moment."

Companies like Nvidia, Microsoft, Datadog, and Palantir have already illustrated how AI use cases are increasing across the enterprise and consumer landscape, and things are only ramping up.

The firm's favorite tech names include Apple, Microsoft, Palo Alto Networks, Palantir, Zscaler, CrowdStrike, and MongoDB, according to Monday's note. Meanwhile, as far as consumer tech plays, Wedbush highlighted Amazon, Alphabet, and Meta Platforms as names to watch.

"[W]e view AI as the most transformative technology trend since the start of the Internet in 1995 and believe many on the Street are still underestimating the $1 trillion of AI spend set to happen over the next decade in a bonanza for the chip and software sectors looking forward with Nvidia and Redmond leading the way," the strategists said.