TLDR
- Tech stocks declined 2-3% this week with Nvidia, Microsoft, and Alphabet leading losses during market sell-off
- Dan Ives calls current pullback a healthy “1996 moment” and expects AI bull run to continue 2-3 more years
- Meta posted 36% net income growth in Q2 with 3.48 billion daily users driving advertising revenue surge
- Reddit achieved first profitable quarter with 78% revenue growth to $500 million from AI licensing deals
- Analyst rates Nvidia, Microsoft, Broadcom as Strong Buys ahead of next week’s earnings reports
Tech stocks faced selling pressure this week as major names posted declines. Nvidia fell nearly 3% while Microsoft dropped 2.7% and Alphabet declined 2.24%. The broader tech sell-off hit chipmakers including AMD, Broadcom, and Micron as investors worried about high valuations.
Wedbush Securities analyst Dan Ives remains bullish on the sector despite the weakness. He compares the current moment to 1996 when Fed Chair Alan Greenspan warned about market exuberance. That tech rally continued for years after the initial concerns.
The analyst believes this tech boom stems from the largest wave of technology investment in decades. AI adoption is still in early stages as companies discover the value artificial intelligence creates. Ives expects the bull cycle to last another two to three years.
Nvidia Leads AI Chip Demand
Ives stays particularly optimistic about Nvidia heading into earnings next week. He points to overwhelming demand for AI chips with a 10:1 supply-to-demand ratio. The company continues driving the AI revolution as the central player in the space.
Among major tech stocks, analysts rate Nvidia, Microsoft, Broadcom, and Micron as Strong Buys. Micron shows the highest upside potential with projected 31.23% gains based on analyst targets. Memory chip demand should benefit from AI data center growth.
Meta Platforms delivered strong Q2 results highlighting digital advertising momentum. Net income surged 36% while daily active users reached 3.48 billion across its app family. Ad impressions grew 11% with pricing up 9% year-over-year.
Social Media Stocks Show Growth
The social media giant invests heavily in AI infrastructure while maintaining positive cash flow. Meta trades at a 28 price-to-earnings ratio despite rising over 340% in three years. Analysts project 17% annual earnings growth long-term.
Reddit emerged as another standout with 78% revenue growth to $500 million in Q2. The platform posted its first profitable quarter with $89 million net income versus a $10 million loss last year. Daily active users grew 21% to 110 million.
The discussion platform benefits from AI licensing deals as developers use its content for training language models. Reddit signed agreements with Alphabet to license user-generated content. Ad revenue makes up 93% of total sales and grew 84% annually.
Reddit’s 91% gross margin and 3% operating margin suggest room for profit expansion. The company could introduce subscription services while scaling its advertising business to boost profitability further.
