The AI Revolution: Tech Stocks, Trends, and Market Insights for 2024

The year 2023 marked a significant turning point in the tech industry, particularly in the realm of artificial intelligence (AI). As we enter 2024, it’s crucial to understand the dynamics, trends, and key players that are shaping the future of technology. Ben Reitzes, Head of Technology Research at Melius, shared valuable insights during his recent interview on CNBC, shedding light on the evolving landscape of AI and tech stocks.

A Year of Training and Transformation

According to Ben Reitzes, 2023 can be characterized as a year of training and discovery in the world of AI. It was a period when the potential of large language models, like ChatGPT, became evident. However, the realization also came that these AI models required extensive training and computational power, with NVIDIA emerging as a key player in this space. NVIDIA secured a significant share of profits and established itself as an early winner in the AI race.

As we move into 2024, Reitzes predicts that NVIDIA will continue to dominate, but the market will gradually broaden. It’s worth noting that many tech stocks have surged ahead of incorporating AI into their financials in a substantial way. Despite this, Reitzes remains enthusiastic about the AI sector, emphasizing its continued growth and potential.

The Tech Stocks to Watch

Ben Reitzes highlights the importance of holding tech stocks that are on the path to sustained growth. He underscores the fact that the U.S. government still has to allocate funds as part of the Chips Act, providing additional opportunities for tech companies. In this context, he recommends Intel (INTC), a stock that may have lagged behind slightly in terms of performance but has the potential to catch up.

Reitzes anticipates an “AI halo effect” that will benefit various tech companies. One such beneficiary is Dell (DELL), which aligns with the trends seen in Super Micro Computer (SMCI). While Dell offers diversified products, including personal computers (PCs), it provides a cost-effective way to invest in the AI sector.

On the other end of the spectrum, Reitzes mentions AMD (AMD) as a rising player, albeit a distant second to NVIDIA. AMD has the potential to achieve over $8 in earnings power, positioning itself as a viable option for investors in the AI space.

IBM (IBM) also gains mention as a tech stock that has been on the rebound after a prolonged period of underperformance. Reitzes suggests that IBM could reach $210, with a multiple of 18 to 19 in the next year’s numbers. Additionally, the consulting segment of IBM is expected to experience growth.

Navigating Risks and Challenges

While the tech industry is brimming with opportunities, it’s not without its risks and challenges. Ben Reitzes identifies China and geopolitical tensions as one of the primary concerns that could impact the tech sector. The unpredictability of global politics can influence market psychology and create uncertainty.

Another area of uncertainty is the application software segment within AI. High expectations have been placed on stocks in this category, such as Adobe and Microsoft. While Microsoft is widely regarded as a winner, Reitzes predicts that it will continue to outperform over the next few years. However, the sector faces unpredictable risks, including regulatory changes and data licensing issues.

In conclusion, Ben Reitzes asserts that we are embarking on the next major tech cycle, driven by AI and its far-reaching applications. While challenges exist, the potential for growth and innovation in the tech industry remains substantial. As investors and tech enthusiasts, it’s essential to stay informed, keep an eye on emerging trends, and carefully evaluate tech stocks in this dynamic landscape. The AI revolution is here, and it’s reshaping the future of technology in ways we are only beginning to comprehend.