AI’s Transformative Role in the Economy
Dan Ives, a prominent analyst at Wedbush, asserts that artificial intelligence (AI) is not merely a trend but represents the “fourth industrial revolution,” fundamentally reshaping industries and labor. With over 25 years in the field and a track record of logging more than 3 million miles visiting data centers and engaging with CEOs and CIOs, Ives emphasizes that genuine demand cannot be captured through spreadsheets. His insights stem from firsthand interactions in the tech landscape, where he notes, “You can’t see demand from a spreadsheet.”
Ives predicts that spending on AI will significantly ramp up, stating, “More money will be spent in the next two years than the last 10 combined.” This sentiment is echoed across the investment community, with ARK Invest’s Cathie Wood remarking that the AI narrative is in its infancy, describing the current phase as the first inning of an expansive game. According to Gartner, global AI expenditure is projected to hit approximately $2 trillion by 2026, a figure that reflects the growing urgency for infrastructure over speculative investment.
Distinguishing between the current AI boom and the dot-com bubble, Ives contends that this wave of capital is directed at tangible infrastructure developments, such as cloud migration and semiconductor production, rather than ambiguous promises. “This is a 1996 moment, not 1999,” he states, suggesting that while market sentiment may fluctuate, the foundational trajectory for AI is solid.
Conversely, billionaire investor Michael Burry, known for his role in “The Big Short,” is taking a cautious approach, betting against AI-centric companies like Nvidia and Palantir with investments totaling around $10 million. In contrast, Ives highlights not only the major players in AI like Nvidia, Microsoft, and Google but also the “second-, third-, and fourth-derivative” companies that underpin the industry, particularly in cybersecurity. Firms such as CrowdStrike and Zscaler stand to benefit as AI transforms the landscape of both cyber threats and defenses.
Ives’s views extend beyond the giants of tech. He emphasizes the critical role of cybersecurity, data-center infrastructure, and enterprise software in the burgeoning AI economy. As AI becomes more integrated into businesses, these less visible entities are poised for significant growth, according to Ives. “As AI builds the new economy for enterprises and consumers, first-order beneficiaries like Nvidia, Microsoft, and Palantir are core names in 2026,” he notes, while highlighting the growth potential for firms within the cybersecurity sector.
Looking forward, Ives forecasts that AI-related investment by enterprises and government entities will exceed the cumulative spending of the past decade. The Kobeissi Letter indicates that 63% of recent U.S. economic growth can be traced back to AI-driven expenditures, asserting that “without AI spending, the economy is running FAR weaker than it seems.” This acceleration in AI adoption is further fueled by national initiatives in the U.S. and China, emphasizing the strategic importance of companies like Nvidia and Palantir in government and defense sectors.
Recent developments, including President Trump’s December 8 announcement permitting Nvidia to ship its H200 AI chips to “approved customers” in China, underscore the geopolitical significance of AI hardware. These chips are part of a broader strategy that highlights the dual nature of AI as both an economic tool and a national security asset.
On the cybersecurity front, Wedbush retains an Outperform rating on CrowdStrike Holdings, setting a 12-month price target of $600 against its current trading price of $509.16. CrowdStrike’s innovative security strategies, particularly its use of the Charlotte AI framework, position it as a leader in AI-driven cybersecurity. With an estimated $150 billion in AI-addressable assets, CrowdStrike is increasingly valuable for enterprises seeking to mitigate AI-enabled threats.
Moreover, Ives has noted the evolving landscape for Palantir, once seen as overly reliant on government contracts. Taking a contrarian view, he recognized the company’s strategic pivot and growth potential, culminating in a July 2023 Outperform rating and a price target of $25, significantly higher than its then-trading price of $16.15. Today, Palantir’s shares hover around $180, illustrating the market’s recognition of its evolving capabilities. Ives described Palantir as the “Messi of AI,” likening its potential to the legendary soccer player’s exceptional talent.
As the AI landscape continues to evolve, Ives’s insights underscore the importance of both established and emerging players in reshaping the economic fabric. The ongoing investments in AI infrastructure and technology promise to redefine industries and drive substantial growth, setting the stage for a new economic paradigm.
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