Dan Ives makes bold tech prediction as AI boom enters 'second inning'

Tech stocks are back near record highs, but Dan Ives says this is just the beginning. The Wedbush analyst joined TheStreet to explain why the AI bull market is far from over, and which names could lead the next leg higher.

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Full Video Transcript Below:

CAROLINE WOODS: Joining me is Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities. Dan, Thanks so much for being here.

DAN IVES: Great to be here. Looking forward to it.

CAROLINE WOODS: Dan, tech has had this really impressive recovery off the April lows. It's trading at or near all time highs. What's your outlook for the rest of the year?

DAN IVES: I think we're going to continue to see new highs. And we've talked about you could be looking at S&P potentially 7,000 and NASDAQ. I think there could be another 15% higher because look it's our view, the AI revolution is just hitting its next stage of growth from software to consumer to really the rest of the supply chain. And even though we have tariffs and obviously geopolitical, I think it's going to be a risk on pretty significant going into the summer as well as the rest of the year.

CAROLINE WOODS: So what is it that gets the S&P to 7,000 and the NASDAQ up another 15%?

DAN IVES: It's numbers. I mean, I just believe Street's underestimating numbers potentially for second half of the year, but especially into next year by upwards of 10% to 15% I think numbers go a lot higher because of the spending, and because we're going to see 2 trillion of incremental spend next three years. And even when you start to think about now, sovereigns are starting to look at AII you look at that spreading geopolitically, despite some of the uncertainty there, you're going to start to see it pop up more within Asia, within Middle East. And that's bullish for Nvidia  (NVDA) . Bullish for Microsoft. Bullish for Palantir  (PLTR) . Which speaks to my view. If you focus just on one year PE valuations you missed every transformational tech stock for the last 20 years.

CAROLINE WOODS: You talk about it going into next year. How do you think or how long do you think the overall tech bull market is going to last?

DAN IVES: I think it's another three year bull market for tech because look, it's our view. This is a fourth Industrial Revolution that we're living in, and we're just in the bottom, first, top, second inning of where AI is going. And now it's going to spread across the board to other whether it's cybersecurity, whether it's other parts of software, whether it's infrastructure on the energy side when it comes to nuclear and others. And that's why I believe, I mean, that, you know, I get why some get concerned on valuation, but I believe we're going to be talking about things like NASDAQ 25,000, you know, over the next call it 12 to 18 months.

CAROLINE WOODS: What's the threat of tariffs at this point. Because previously you had referred to it as an economic tariff Armageddon. And those deadlines are approaching. So how big of a risk are they now?

DAN IVES: Yeah but my view then. I mean, remember there were some scary weeks ministrations backed off significantly in terms of China. And I think you'll see those descale further in terms of ultimate tariffs. And I think the Trump administration's recognize and I've seen it, you know, being in DC a few times maybe initially what they're looking for. They had a backtrack. And I think that's what the market is factoring in as well. You'll have a baseline 10% tariff. You'll have some incremental reciprocal tariffs. But that's not significantly moving the needle here. I also think the most important thing is the us-china trade deal on the table. And that's something especially for Nvidia. When you claw back 50, 60% of that China business that they've essentially handed to Huawei.

CAROLINE WOODS: I'm curious, how is your AI playbook changing for the second half of the year, especially now that you really are focused on this golden age of software, as you call it?

DAN IVES: Yeah and look, and that speaks to our lives. I the 30 names we've identified the derivatives across. When you think about second third derivatives of AI, it's really about software. I mean, I do view it as a golden age for software, from the hyperscalers to names like Oracle, IBM  (IBM) , of course, led by names like Palantir, which I believe Palantir is going to be dollar trillion market cap next two to three years. But the use cases are playing out, and you only have 3% of us enterprises that have gone down the AI path. And that's why the Bears, they're sitting there in their caves and hibernation mode. They can't see AI and spreadsheets.

CAROLINE WOODS: I want to focus on Tesla  (TSLA)  because I know you took a few rides in the Robotaxi last weekend. You said it exceeded your expectations, but not enough for you to change your price target on Tesla shares. So I'm curious about if it exceeded your expectations. Why doesn't that impact your price target?

DAN IVES: Yeah, I mean look our team having the ability and obviously is a pretty exclusive. Not many people got rides on Sunday. I going into it, we thought it was going to be 8 out of 10. It was a 10 out of 10, because what I believe was the maneuverability in terms of the safety, the user experience, look, they're going to have speed bumps, they're going to have issues, and all those issues will continue to be scrutinized. But the reason we're not raising price target here or anything like that is because as they prove it out as the geofence scales in Austin, as they go to more cities, I think more investors are going to recognize autonomous is dollar trillion market opportunity for Tesla. But it speaks to our $2 trillion valuation for Tesla. And look and I get haters will hate. But I think they're really going to be the driver of autonomous globally.

CAROLINE WOODS: But Dan they did start small to your point, they required safety monitors in the cars. There's already regulatory scrutiny over some of the issues with the car. So it doesn't seem like a very fast ramp. So I think the big question is, can they ramp fast enough to compete with competitors like Waymo?

DAN IVES: Yeah and look, I'd rather them do this in terms of safety first. Go off slow, geofence slowly build it out because they know I mean, if they run over a squirrel that would be global news right? So so they got to be careful. But my view on Waymo I mean like Waymo is in four cities now potentially five. There are $230,000 cars. Like no one could scale the way Tesla can. And I think that's something that's just not being factored into the stock in my view.

CAROLINE WOODS: In terms of the DOGE fallout. How much brand and reputational damage do you think was done to Tesla? How long does it take to recover from that. And how big of a risk is Musk not necessarily playing nice with President Trump?

DAN IVES: Yeah look 5% to 10% probably permanent brain damage in terms of, 5% 10% of maybe consumers that will never buy a Tesla, right? I think that will ultimately fade some of that within the US, which is why it speaks. It was so important for Musk to distance himself from Trump and DOGE. I think Europe, the brand issues are probably more damaging than maybe in the US, and I think we're seeing that in some of the numbers. But look, I mean, it happened, right? I mean, DOGE took on a life of its own. And I think, you know, Musk recognized that. I do believe when it comes to Trump, there's a cordial relationship. I think I do think they become kind of friendly, you know, slowly again. I don't view that as a negative. I think Trump is going to continue to be a supporter of autonomous, the Musk vision. But look, this is going to be some work ahead, right? Especially when it comes to brand and some of the issues that they're having in Europe, in us as well as in China.

CAROLINE WOODS: We'll get Q2 deliveries for Tesla next week. What do investors need to prepare for. Because I think for overall Q1, you described it as a disaster. What do you think you'll use to describe Q2?

DAN IVES: Yeah, I think Q2 was like, it's going to be, you know, nothing to write home about, but maybe slightly improving. I mean, whatever, call it 375k, give or take. But it speaks to my view that like 90% of the story is about AI, autonomous robotics going forward. Look, you're going to have to have refreshes and you'll see them. And that will help in terms of from a demand perspective. But I think right now the focus is less bad numbers. And then really driving autonomous in AI.

CAROLINE WOODS: Microsoft continues to hit New all time highs Dan. And you're getting more bullish. You just raised your price target on Microsoft to $600. Tell us why.

DAN IVES: I mean I think Microsoft when it comes to this is we're going to be talking about 4 trillion eventually $5 trillion because it's in their backyard in terms of AI. I think this when I look at the stack, the I stack commercial cloud growth I think is going to continue to massively accelerate. We're seeing more and more Microsoft customers go full in on the stack. And that's something where only 20% of Microsoft today is what I view as Cloud Next Gen Cloud Next Gen AI. As that becomes 5,060% and that's really a whole revaluation that's going to happen in the name 600 I ultimately think is probably conservative.

CAROLINE WOODS: Is Microsoft an Azure strength at the expense of Amazon AWS and Alphabet Google Cloud though? Because you're also bullish on those names.

DAN IVES: Yeah look I think there Microsoft's clearly leading when it comes to hyperscale and comes to cloud. I do think AWS Google they've had success start to narrow the gap, but it's not a zero sum game. I mean, you're going to have all beneficiaries here. But no doubt like Microsoft and Nadella are leading when it comes to the infrastructure. When it comes to hyperscale. And that's been a huge part of their success. And I don't see that slowing down. I think investors are just starting to recognize now the next leg of this Microsoft story, as you go into that golden age of software.

CAROLINE WOODS: Dan, there's still quite a few Mag seven names in negative territory. Year to date and well off the highs. Apple  (AAPL) , Alphabet  (GOOGL) , Tesla, Amazon  (AMZN) . Do you think it's time to regroup them because they're not necessarily magnificent right now?

DAN IVES: Yeah not magnificent but each of them have different headwinds right. Apple really nowhere when it comes to AI. Google the words that AI is going to cannibalize search I think that's probably overdone as well as maybe some of the regulatory. I think Amazon is probably the one that I believe that has the clearest road ahead in terms of where I ultimately see them going when it comes to e-commerce as well as AWS when it comes to some of the success. So to me, I don't think you regroup them. I just think those have private situations, including tasks that they have to navigate. OK just quickly, because I know we're almost out of time.

CAROLINE WOODS: When you think about the biggest beneficiaries of AI from here, would you rather buy Nvidia at all time highs or Apple more than 20% off the highs?

DAN IVES: You'd rather own Nvidia just because there's only one chip in the world, and that's led by the godfather of AI, Nvidia. And that's not stopping. That's why we're talking about 4 trillion and will ultimately be $5 trillion market cap.

CAROLINE WOODS: And if you could only buy one tech stock overall right now, what would it be?

DAN IVES: You own Palantir. Palantir to me, massive AI. And really, I believe leading the AI revolution when it comes to the software side. And I think that's dollar trillion market cap in the next two or three years.

CAROLINE WOODS: OK Dan Ives, always appreciate your insights.