Unafraid of the pullback! Wedbush calls for bottom fishing in tech stocks, expecting another 15% increase by the end of the year

According to the Zhitong Finance and Economics APP, Wedbush stated in a report last Sunday that the recent decline in tech stocks presented a strong buying opportunity, as solid corporate earnings season may drive the industry to achieve double-digit growth again before the end of the year.

Last week, tech stocks fell along with the broader market, with the Nasdaq Composite Index dropping by 0.6%, as traders reacted to a popular consumer price index report and lowered expectations for a Fed rate cut. Data from the CME FedWatch tool showed that inflation levels over the past three months have been higher than expected, leading investors to reduce the probability of a rate cut in June to 18%.

However, Wedbush noted that the profit environment for tech companies still appears strong, especially considering the frenzy around artificial intelligence that has propelled the surge in tech stocks over the past year. The firm's strategist added that a strong earnings season could be a major positive catalyst for tech stocks, predicting a further 15% surge in the industry by the end of 2024.

"We believe that the recent risk-off environment and tech stock sell-off have provided a clear buying opportunity for the upcoming tech earnings season," the strategist said. "While high CPI, weak bank performance, and geopolitical concerns have put pressure on the stock market, the spotlight is now on the upcoming key tech earnings season, and we believe this season will be overall strong."

According to a consumer survey conducted by Wedbush, consumer spending trends for internet companies in the first quarter were "strong." They also noted that the growth of digital advertising is expected to be strong, which will be a positive factor for companies like Google (GOOGL.US), Amazon (AMZN.US), and Meta (META.US).

Meanwhile, AI spending is expected to account for 10% of enterprise IT budgets this year, which will be a boon for companies like Microsoft (MSFT.US) and Palantir (PLTR.US). Wedbush strategists expect a $1 trillion impact on the industry from AI spending over the next decade, with the second, third, and fourth waves of spending impacting the field in the coming years.

The report added, "Over the past month, we have conducted numerous on-the-ground checks globally, which has given us great confidence as the baton has been passed from chips to the software phase, use cases are exploding, and the monetization of the AI revolution is now entering the next growth phase."

It is understood that investor sentiment on Wall Street deteriorated last week as traders considered the possibility of rates remaining high for a longer period. According to the latest investor sentiment survey by the American Association of Individual Investors (AAII), only 43% of investors expressed optimism about the stock market in the next six months.

Concerns about an economic recession have also increased, as high rates could lead to excessive economic tightening and a recession. According to the latest estimate from the New York Fed, the probability of the U.S. entering a recession by March 2025 is 58%