Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) saw “very robust” demand from the enterprise for their artificial intelligence and cloud computing services, investment firm Wedbush Securities said.
“We believe tech stocks will have a very strong 3Q earnings season led by Big Tech as the cloud stalwarts Microsoft, Alphabet, and Amazon had very robust AI enterprise demand in the quarter based on our field checks,” analysts at the firm, led by Dan Ives, wrote in a note to clients. “While some investors continue to question the valuations and pace of this tech spending trend, we believe to the contrary the [Wall] Street is still underestimating how big this AI spending trajectory is, and we expect 3Q tech earnings to be another validation moment with a doubling down on aggressive initial cap-ex numbers into 2026.”
As such, the firm is expecting that roughly $3T in spending will come over the next three years from the enterprise and governments for AI technology and its use cases. The firm also said that tech stocks could rise 7% or more into the end of the year, with the quarterly results likely to show investors that the AI spending trend is still in its early innings. Prime examples of this are the recent OpenAI (OPENAI) partnerships with Nvidia (NVDA) and AMD (AMD).
“We also believe the latest investments by OpenAI into Nvidia and AMD speak to the capacity buildout and demand drivers happening on the enterprise front which is now creating positive ripples for the 2nd/3rd/4th derivatives of the AI Revolution and speaks to our IVES AI 30 list of tech winners,” the analysts added.
Microsoft, Amazon and Alphabet are all set to report quarterly results in the next several weeks.