Big technology stocks had a bad September and they could keep dragging on the wider market unless they deliver some good news.
Nvidia
and International Business Machines are two companies that could help stop the bleeding, according to Melius Research’s Ben Reitzes.
The case for
Nvidia
(ticker: NVDA) is simple—it’s the stock that will get the most immediate benefit from spending on artificial-intelligence technology. Bullish calls for Nvidia have been coming thick and fast in recent days, with Wall Street analysts backing the stock to resume its march upward after a couple of months of sideways movement.
“We believe investors have lost patience with qualitative ‘pipelines,’ ‘levels of engagement,’ and other vagaries. To date, it feels to us that only Nvidia and some AI server plays have real AI numbers,” Reitzes wrote.
Nvidia could regain momentum with more evidence that the big cloud-computing companies are spending more on its graphics-processing units going into 2024. That means investors waiting for a catalyst should be looking for
Microsoft’s
(MSFT) capital-expenditure guidance when it gives its fiscal first-quarter results, expected in late October, according to Reitzes.
Reitzes has a Buy rating and a $730 target price on Nvidia stock. The shares were up 0.5% at $450.12 in premarket trading, having more than tripled this year so far.
IBM
(IBM) is less of a consensus call than Nvidia, with the stock having flatlined this year. However, Reitzes argued that a stock drop caused by investors taking fright at an earnings miss from consultancy rival
Accenture
(ACN) is an opportunity.
“We believe that IBM is diverging from Accenture (who just reported weak consulting bookings) since Big Blue is being helped by consulting demand tied to its own software offerings,” Reitzes wrote.
Reitzes has a Buy rating and $175 target price on IBM. The shares were up 0.3% at $141.23 in premarket trading.
While Reitzes remains in a minority among analysts polled by FactSet in being bullish on IBM he was joined recently by peers at RBC Capital Markets, who initiated coverage on the stock with an Outperform rating and target price of $188.
Write to Adam Clark at [email protected]
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