Investing.com – Tech stocks have suffered a bumpy ride in September as the road to higher rates for longer has rejuvenated the bears, but Wedbush argues, this weakness will prove to be a temporary joyride as the upcoming earnings season for big tech and fed cuts next year will trigger a rebound in growth across tech.

“Our bullish stance on tech is unchanged despite market fears,” Wedbush analysts led by Dan Ives, a tech bull, said in a note Wednesday, highlighting various positive factors for the industry including the growth of artificial intelligence, cloud, and a rebound in ad-spending. 

Market 'obsession' with rates soon in rearview mirror as Fed cuts on horizon  

The Fed's latest projections on the path of interest rates, released last week, showed the Fed members revised the number of rate cuts for next year to two from four previously. As well as the fewer rate cuts, the Fed maintained its outlook for another rate hike for this year, forcing markets to reprice in a higher for longer interest rate environment.  

The fundamentals for tech, meanwhile, are yet to be priced in, Wedbush argues, pointing to “transformational growth” of artificial intelligence, cloud, cyber security, and rebound in the digital advertising market.

'Generational' AI growth set to drive tech spending

"While this 3Q tech earnings cycle will not in itself turn the negative bearish sentiment away, we expect a positive earnings season for Big Tech which we view as a sneak preview for a major rebound in growth across the tech sector in 2024 with a soft landing backdrop," Wedbush added.

Wedbush is not alone in talking up the promise of AI. JPMorgan believes the AI hype is real and it’s here to stay.

“They’ve come off the boil since July, but there’s still a lot of optimism regarding AI’s impact on growth, profits and productivity,” {{0|JPMorgan said in its published outlook on Sept. 26, referring to the recent weakness in AI-related stocks.