Wedbush (IVES) said the tech earnings season should be an AI validation sign for the bulls led by big tech.
“Heading into 2026, investors are both excited and nervous about the AI Revolution. On one hand this is a 4th Industrial Revolution taking shape with the US leading China on tech for the first time in 30 years…while on the other hand the trillions of dollars needed to reach the heights of enterprise/consumer AI Revolution have caused nervousness among investors,” said analysts led by Dan Ives.
The analysts believe both sides can be right at the same time, and it ultimately speaks to 2026 being an inflection point year for the AI Revolution with a key fourth quarter tech earnings season ahead.
“We believe tech stocks will have a very strong 4Q earnings season led by Big Tech as the cloud stalwarts Microsoft (MSFT), Alphabet (GOOG) (GOOGL), and Amazon (AMZN) had very robust AI enterprise demand in the quarter based on our field checks,” said Ives and his team.
The analysts noted that some investors continue to question the valuations and pace of this tech spending trend, but they believe to the contrary that the Street is still underestimating how big this AI spending trajectory is. The analysts expect tech earnings to be another validation moment with a doubling down on aggressive initial capex numbers into 2026.
The analysts added that their bullish view is that investors are still not fully appreciating the tidal wave of growth on the horizon from the $3T of spending over the next three years coming from enterprise and government spending around AI technology and use cases.
“We have barely scratched the surface of this 4th Industrial Revolution now playing out around the world led by the Big Tech stalwarts such as Nvidia (NVDA), Microsoft, the Messi of AI Palantir (PLTR), Meta (META), Alphabet, and Amazon,” said Ives and his team.
The analysts believe tech stocks will be strong in 2026 as the next part of this AI Revolution takes hold with the upcoming tech earnings season further swaying investors with over $550B of capex now playing out.
The analysts said that the time has come for the broader tech space to get in on the AI Revolution, as they believe the use cases are exploding. The analysts added that the enterprise consumption phase is ahead of them into 2026, launch of LLM models across the board, and the true adoption of generative AI will be a major catalyst for the software sector, and key players — Snowflake (SNOW) and MongoDB (MDB) — would benefit from this once-in-a-generation fourth industrial revolution.
“While the first steps in AI deployments are around Nvidia chips and the cloud stalwarts, importantly we estimate that for every $1 spent on Nvidia, there is an $8-$10 multiplier across the rest of the tech ecosystem. We believe Redmond is seeing a further acceleration in its AI strategy in the field with Azure the star of the show,” said Ives and his team.