Tech Pullback Will Be Short-Lived, Analyst Says. AI to Drive Nvidia, Apple.

Although eking out a small gain on Thursday, the Nasdaq, down 4.35% over the last 14 days, was on pace for its largest two-week decline of the year on Friday. It will also be the first time the index has fallen on consecutive weeks this year. The index, down 4.6% for the month, is pressured partly due to rising Treasury yields. The latest earnings from

Apple

(ticker: AAPL), as well as known software names including

Palantir Technologies

(PLTR) and

Datadog

(DDOG) have failed to impress investors. It doesn’t help that August is historically the second worst month for the index.

“We expect pullback to be short-lived,” Ives said, in a note on Friday, still firmly sticking with his bullish call that tech stocks could see a boost of 12% to 15% in the second half of the year. He first made the call in June, revising his forecast of a 10% to 12% gain.

Ives has long been a tech bull and has even predicted

Apple

to hit $4 trillion market capitalization by 2025. The company presently sits at $2.8 trillion.

The analyst’s optimism about the Nasdaq stems from his view that artificial intelligence isn’t a hype cycle and spending on AI tools will ramp up slowly, with companies allocating $800 billion to the area incrementally over the next decade.

“Rome was not built in a day, and neither will the AI ecosystem—but lets be clear, this build out is unlike anything we have seen since the internet in 1995,” he said. Ives expects the tech market to rage for the next 12 to 18 months.

The winners? He picks Nvidia (NVDA), which leads the market for semiconductors used for AI applications. Ives rates the company’s stock at Outperform with a $490 target price, implying a roughly 20% gain from Friday’s value.

Other picks include

Microsoft

(MSFT), the investor in OpenAI—the developer of AI sensation ChatGPT, and Apple, which he expects to build an AI-driven app store. He rates stocks of both companies Outperform, with a $400 and $230 target price, respectively.

Write to Karishma Vanjani at [email protected].