Big Tech is in a sentiment "penalty box" even as the multi‑year AI build‑out enters a critical acceleration phase, and Wedbush tech analyst Dan Ives argues that creates a prime entry point into the core AI winners.
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Ives’ latest industry note frames the current pullback in the major AI platforms as another "gut check" stretch for tech investors heading into a pivotal earnings season.
The market is wrestling with "worries around the costs of this once-in-a-generation tech buildout" just as spending ramps into what Ives calls the 4th Industrial Revolution.
Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Palantir Technologies (NASDAQ:PLTR), Oracle (NYSE:ORCL), Nvidia (NASDAQ:NVDA), Amazon.com (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) are driving the trend but under massive selling pressure. Ives describes Microsoft and Meta as being "treated by investors like they are bear market names that cannot be owned."
‘The Waiting Stage’
Ives argues the core issue is timing, not fundamentals.
Big Tech is in an "air pocket stage" where roughly $700 billion of capex this year is funding AI datacenter and compute buildouts, but monetization is still six to 12 months away for the software and consumer franchises sitting on top.
Microsoft, Meta, and to a lesser extent Amazon and Alphabet, are "in the waiting stage to see the growth/monetization boom," according to the analyst, even as Alphabet has been "the golden child of this group" before a recent loss of engineers to Anthropic.
In a vivid image, Ives says Microsoft and Meta are being treated "like they are wearing winter jackets to the beach in the summer."
Meta, in particular, is "looking to transform its business" with massive AI investments that will "take some time to hit numbers," pushing some investors toward memory and infrastructure names in the interim.
Ives pushes back on that trade, stressing that "this is Year 3 of a 10-year AI buildout… short term pain for long term gain" and that current bearish narratives "have overshadowed the future massive growth prospects."
Rising Memory Costs
The second source of anxiety is rising compute and memory costs, sharpened by Apple’s recent price increases. The news sparked "a negative jolt," according to Ives, and fears of a breaking point at which enterprises slow AI deployment, with the "game of musical chairs" leaving some hyperscalers without a chair.
Wedbush sees costs moderating over the coming year as AI consumer hardware, physical deployments, and enterprise use cases "explode at scale," turning today’s worries into "a distant memory (like building the Las Vegas strip in the 1950’s)."
Until then, Ives predicts "the bears will continue to yell fire in a crowded theater any chance they get…this is not the first time and not the last time we will go through these ‘gut check moments’ for the tech bulls."
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