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I think what's happening here, we're almost having a mini deepseek moment going back to a year ago. A moment where investors feel like, okay, it's cracking. You know, the the the trade is really starting to, you know, almost blossom into something that that's uh that's become a storm. I disagree. I think this is actually much more of uh smoke no fire bark worse and a bite relative to just massive monetization and spending that we actually see playing out in front of us.
Investors are just growing increasingly concerned about what this all means from a capex perspective. The thing that concerns me is does that in any way slow down the pace of AI spend? I don't believe it does. I think these companies to some extent I come out of earning season more emboldened that this AI revolution is hitting this next stage of growth.
The tech sector is currently locked in a white knuckle freefall and the palpable panic on the trading floor is reaching a fever pitch. In a year where software giants have been unceremoniously thrown into the garbage with some blue chip names cratering as much as 30% in just the first few weeks of 2026.
Investors are frantically asking if the AI party has finally been raided by the cops. While the tape looks like a bloodbath and retail sentiment hits new lows, Wedbush's Dan Ies is standing defiant against the crowd. He is calling this an Armageddon-like mispricing and a deep sea moment. He isn't just ignoring the noise.
He is actively leaning into the carnage, reaffirming a massive 20% to 25% upside for the NASDAQ by the end of 2026. Ives's conviction is backed by a brutal reality check on fundamentals that many casual observers are missing. His latest field checks show an incredible 10:1 demand ratio for AI infrastructure, proving that while the tape is nervous, the enterprise spending cycle is actually accelerating behind the scenes.
He views the massive capex spending from the MAG 7 not as a burden or a sign of overspending, but as the fuel for an 8 to 10year revolution that is only just entering its third year. To Ives, this isn't a crack in the trade. It's a generational buying opportunity that echoes the most profitable entry points of the last decade.
Today, we are breaking down the three power players Ives is backing with everything he's got. Starting with the cloud king. Let's begin our deep dive with a titan that has become the centerpiece of the current market debate. Microsoft, trading under ticker MSFT. Despite the staggering 17% year-to-ate decline that has wiped out billions in market cap, the fundamental data tells a story of a massive disconnect between price and performance.
While the SAS apocalypse narrative has retail investors running for the exits, the numbers suggest this isn't a collapse. It's a coiled spring. Microsoft recently delivered a powerhouse Q2, beating expectations with data focus 81.3 billion in revenue, a nearly 17% jump year-over-year. Even more impressive, their non-GAAP diluted EPS surged 21% to $4.14 while operating margins expanded to a robust 47.1%.
So why the sell-off? The market fixated on a marginal 1% sequential slowdown in Azure growth, completely ignoring the fact that demand is actually outstripping supply. In fact, management has noted that if they had more chip capacity to allocate purely to Azure, that growth rate would have likely smashed through the psychological 40% barrier.
The real catalysts for future upside are hidden in the diversified AI stack that Microsoft is rapidly monetizing. M365 C-pilot paid seats exploded by 160% this quarter, reaching 15 million users and already generating an estimated 5.4 billion in annual recurring revenue. Meanwhile, GitHub Copilot has hit nearly 5 million subscribers.
Furthermore, the new Maya 200 custom accelerator chip is a massive hidden catalyst, promising a 30% performance per dollar improvement for Azure customers and helping to mitigate supply constraints. Looking at the opportunity ahead, Microsoft's has skyrocketed 110% to a jaw-dropping $625 billion. With the stock now trading at roughly 25.7 times forward earnings, a 20% discount to its 5-year average, Microsoft has officially become the cheapest play in the Magnificent 7 on a PE basis.
This is a prime accumulation window for a business transitioning into a mature AI compounding machine. As we move from the software layer to the silicon heart of the revolution, we find our second buy the dip favorite, Nvidia, trading under ticker NVDA. While the current market volatility has pushed the stock down approximately 9% year-to date, the underlying data suggests Nvidia is building a competitive moat that goes far beyond simple chip speed.
At CES 2026, Nvidia signaled a major shift, prioritizing efficiency, power orchestration, and reliability over raw flops. This is because inference is overtaking training as the primary AI cost driver at scale, accounting for approximately 80% of compute workloads for major players like Open AI. NVIDIA's new Reuben architecture is specifically designed for this shift, focusing on cost per token and securing the economics of AI throughout the entire system life cycle.
This creates massive switching costs. Moving to a different platform is no longer a simple hardware swap, but a multi-year software and operational overhaul requiring new orchestration and networking layers. The opportunity in China remains a significant yet misunderstood catalyst. Reports indicate that Chinese tech giants like Alibaba and Tencent have been cleared to buy up to 400,000 H200 chips with total potential orders exceeding 2 million units, representing a possible $54 billion in additional sales.
Domestically, the arms race demand is relentless. Meta has guided for up to $135 billion in 2026 capex. While Microsoft's estimated spend sits near $142 billion, while a 40 times forward PE might look rich on the surface, Nvidia's forward PEG ratio sits between 1.0 and 1.1, well below the sector median of 1.6.
This tells us the market is already pricing in a sharp deceleration that fundamentals don't support. With a $500 billion backlog for Blackwell and Rubin through the end of 2026 and a staggering 40% average return on invested capital over the last decade, Nvidia remains the indispensable foundational arms dealer for the AI era.
Finally, we arrive at the stock Dan Ies calls his Mount Rushmore pick, the ultimate pure play AI winner, Palanteer Technologies, trading under ticker PLTR. While the broader market has been rattled and Palanteer itself has seen its shares retreat over 22% from recent highs, the underlying data reveals a business thriving at an unprecedented scale.
Palanteer's Q4 2025 results were a massive blowout, featuring a staggering 70% year-over-year revenue growth to $1.40 billion. This explosion was fueled by a jaw-dropping 137% increase in US commercial revenue, proving their artificial intelligence platform is delivering realworld results that legacy software firms can only dream of.
What truly sets Palunteer apart is its rule of 40 metric, which reached an exceptional 127% in the latest quarter. This figure eclipses every other comparable software company and proves that demand for Palunteer is organic and non-ircular. Their unique forward deployed engineering model and AIP boot camps have turned the company into an AI agent factory, allowing customers to build autonomous agent swarms and migrate complex systems like SAP in weeks rather than years.
Looking ahead to the rest of 2026, the opportunity is even larger. Palunteer has issued revenue guidance between $7.18 billion and 7.20 billion, representing growth of over 61%. More impressively, free cash flow margins are projected to surge past 55% in 2026, up from 30% just two years ago. With a pristine balance sheet carrying 7.17 billion in cash and zero debt, Palanteer is perfectly positioned to dominate the fourth industrial revolution.
While the stock trades at a premium of roughly 104 times forward earnings, the recent pullback has compressed that multiple from over 200 times, creating what many see as a generational entry point. As Iive suggests, if you have a long-term horizon, you are looking at a company on a clear path to becoming a trillion dollar AI powerhouse.
The volatility we are witnessing in 2026 isn't a sign of the bubble bursting, it's the white knuckle transition into the next stage of the AI revolution. Whether it's Microsoft's massive 625 billion backlog, Nvidia's shift to owning the economics of inference or Palunteer's unparalleled growth and 127% rule of 40, the fundamental data suggests the AI party is just getting its second wind.
As Dan Ies famously noted during this interview, turbulence is expected. Just wear your seat belt. Don't let short-term tape noise distract you from what are clearly generational buying opportunities in the winners of the AI era. The fundamental checks are accelerating and for disciplined investors, the current sell-off is simply a gift in disguise.
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