The Wedbush analyst says Wall Street is underestimating what’s coming next for AI.
Transcript:
CAROLINE WOODS: Joining me is Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities. Dan, Thanks so much for being here.
DAN IVES: Great to be here. Looking forward to it.
CAROLINE WOODS: Dan, tech has had this really impressive recovery off the April lows. It’s trading at or near all time highs. What’s your outlook for the rest of the year?
DAN IVES: I think we’re going to continue to see new highs. And we’ve talked about you could be looking at S&P potentially 7,000 and NASDAQ. I think there could be another 15% higher because look it’s our view, the AI revolution is just hitting its next stage of growth from software to consumer to really the rest of the supply chain. And even though we have tariffs and obviously geopolitical, I think it’s going to be a risk on pretty significant going into the summer as well as the rest of the year.
CAROLINE WOODS: So what is it that gets the S&P to 7,000 and the NASDAQ up another 15%?
DAN IVES: It’s numbers. I mean, I just believe Street’s underestimating numbers potentially for second half of the year, but especially into next year by upwards of 10% to 15% I think numbers go a lot higher because of the spending, and because we’re going to see 2 trillion of incremental spend next three years. And even when you start to think about now, sovereigns are starting to look at AII you look at that spreading geopolitically, despite some of the uncertainty there, you’re going to start to see it pop up more within Asia, within Middle East. And that’s bullish for Nvidia NVDA. Bullish for Microsoft. Bullish for Palantir PLTR. Which speaks to my view. If you focus just on one year PE valuations you missed every transformational tech stock for the last 20 years.
CAROLINE WOODS: You talk about it going into next year. How do you think or how long do you think the overall tech bull market is going to last?
DAN IVES: I think it’s another three year bull market for tech because look, it’s our view. This is a fourth Industrial Revolution that we’re living in, and we’re just in the bottom, first, top, second inning of where AI is going. And now it’s going to spread across the board to other whether it’s cybersecurity, whether it’s other parts of software, whether it’s infrastructure on the energy side when it comes to nuclear and others. And that’s why I believe, I mean, that, you know, I get why some get concerned on valuation, but I believe we’re going to be talking about things like NASDAQ 25,000, you know, over the next call it 12 to 18 months.
CAROLINE WOODS: What’s the threat of tariffs at this point. Because previously you had referred to it as an economic tariff Armageddon. And those deadlines are approaching. So how big of a risk are they now?
DAN IVES: Yeah but my view then. I mean, remember there were some scary weeks ministrations backed off significantly in terms of China. And I think you’ll see those descale further in terms of ultimate tariffs. And I think the Trump administration’s recognize and I’ve seen it, you know, being in DC a few times maybe initially what they’re looking for. They had a backtrack. And I think that’s what the market is factoring in as well. You’ll have a baseline 10% tariff. You’ll have some incremental reciprocal tariffs. But that’s not significantly moving the needle here. I also think the most important thing is the us-china trade deal on the table. And that’s something especially for Nvidia. When you claw back 50, 60% of that China business that they’ve essentially handed to Huawei.
CAROLINE WOODS: I’m curious, how is your AI playbook changing for the second half of the year, especially now that you really are focused on this golden age of software, as you call it?
DAN IVES: Yeah and look, and that speaks to our lives. I the 30 names we’ve identified the derivatives across. When you think about second third derivatives of AI, it’s really about software. I mean, I do view it as a golden age for software, from the hyperscalers to names like Oracle, IBM IBM, of course, led by names like Palantir, which I believe Palantir is going to be dollar trillion market cap next two to three years. But the use cases are playing out, and you only have 3% of us enterprises that have gone down the AI path. And that’s why the Bears, they’re sitting there in their caves and hibernation mode. They can’t see AI and spreadsheets.
CAROLINE WOODS: I want to focus on Tesla TSLA because I know you took a few rides in the Robotaxi last weekend. You said it exceeded your expectations, but not enough for you to change your price target on Tesla shares. So I’m curious about if it exceeded your expectations. Why doesn’t that impact your price target?
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