"Wedbush: US Tech Giants to Report 'Strong' Q3 Earnings, Stocks to Rise 20% Next Year"

Wedbush Securities has indicated that the artificial intelligence revolution and the rebound in digital advertising will propel tech stocks higher in the final quarter of this year, following the "strong" start of the tech industry's third-quarter earnings season.

Analysts led by Daniel Ives stated in a report on Sunday: "We believe the main highlight of this tech earnings season is that the hyperscale cloud giants Microsoft (MSFT.US), Google (GOOGL.US), and Amazon (AMZN.US) will all achieve robust growth, exceeding Wall Street expectations, as a significant amount of workload shifts to the cloud, laying the groundwork for the deployment of numerous artificial intelligence enterprise applications/models by 2025."

The firm stated that the advantages of cloud computing are not limited to Microsoft, Google, and Amazon. The report mentioned that Oracle (ORCL.US), SAP (SAP.US), IBM (IBM.US), ServiceNow (NOW.US), Dell (DELL.US), and other companies "are all foundational cloud players," and it is anticipated that "the incremental force of enterprises accelerating AI and cloud deployments will lay the foundation for the second derivative of the AI revolution."

Ives' team stated that by the end of next year, approximately 70% of the world's workloads will be in the cloud, up from the current 50%.

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Wedbush stated that it expects tech stocks to rise by 20% by 2025, as the tech bull market "is just entering the next revolutionary-led phase" and is experiencing "a generational consumer cycle."

Ives said: "We continue to estimate that for every dollar spent on Nvidia's (NVDA.US) GPU chips, the tech industry's price-to-earnings ratio increases by $8 to $10, indicating our firm bullishness on tech stocks for next year."

Analysts stated that Nvidia and Microsoft are the "core drivers of artificial intelligence," but other "tech giants" have also joined the ranks, including Oracle, SAP, ServiceNow, Palantir Technologies (PLTR.US), Salesforce (CRM.US), IBM, Apple (AAPL.US), and AMD (AMD.US), among others.

Meanwhile, Ives stated that Apple's iPhone 16 is initiating the company's artificial intelligence "consumer revolution." He added that Apple's supply chain has indicated to the firm that "this iPhone upgrade cycle could be historic," as the company anticipates that about 300 million phones have not been upgraded in over four years. Furthermore, with "AI-driven upgrades taking hold," Apple's sales next year may exceed 240 million units.

The report predicts that Apple will introduce Apple Intelligence in phases by the end of this month, ushering in a "massive holiday sales season" for the company.