Microsoft (MSFT) and Nvidia (NVDA) are expected to lead the technology stocks in a positive fourth-quarter earnings season, driven by the growing demand for artificial intelligence (AI) projects.
According to Wedbush, Microsoft is rated as “outperform” with a $450 price target, while Nvidia is also rated as “outperform” with a $600 price target. Analyst Daniel Ives mentioned that recent checks in the field have shown an uptick in demand for enterprise software, cybersecurity, and major AI projects. He also highlighted Microsoft’s strong position in the AI space, particularly with its large-language AI chatbot, Copilot.
Ives believes that Microsoft has yet to fully price in the next wave of cloud and AI growth coming in 2024, with a strong competitive edge against Amazon and Google. The increasing demand for AI deployments has also benefited Nvidia, which experienced a 239% gain in stock price in 2023. The company’s graphics processing units (GPUs) are in high demand for AI-related projects.
While some analysts have expressed concerns about the tech sector’s valuations, Wedbush remains optimistic. Ives emphasized that as AI spending continues to increase, Street numbers and valuations for 2024 and 2025 will move higher. The use cases for AI are expanding, and this will be a key driver for tech stocks.
In terms of earnings expectations, Microsoft is forecasted to deliver year-on-year increases in profits and revenues, with consensus forecasts at $2.75 earnings per share and a 15.7% surge in revenues to $61 billion. Nvidia is expected to have earnings per share of $4.49 for the final quarter of 2023, with a massive 232% revenue growth to $20.1 billion.
Wedbush believes that AI will continue to be a predominant driver for tech stocks in 2024 and beyond. Ives mentioned that AI monetization has already started positively impacting the tech sector, with companies like Nvidia, Microsoft, Google, Datadog, and Palantir showcasing the multiplying use cases of AI across various industries.
Overall, the positive outlook for Microsoft and Nvidia in the upcoming earnings season reflects the continued growth and importance of AI projects in the technology sector. As AI deployments increase and use cases expand, these companies are well-positioned to capitalize on the growing demand for AI technologies.
