Tech stocks were the talk of Wall Street in 2023 centering around Magnificent Seven and AI drivers, and it looks like that will continue in 2024. With companies placing major investments in AI across their respective business models, it may signal a paradigm shift.

Wedbush Securities Managing Director and Senior Equity Analyst Dan Ives joins Yahoo Finance to give insight into what he refers to as "the start of the fourth industrial revolution" and which companies stand to best capitalize on this shift.

Ives points out how dominant tech will be this year, affirming: "What this is going to do to the chip sector in terms of this cycle, I think a lot of these chip names, you'll see M&A, what's been Salesforce (CRM), Adobe (ADBE), Oracle (ORCL), it's one where we believe it's a 1995 moment. The biggest tech transformation in the last 30 years."

"We believe, the new tech market has begun despite the bears winning a few battles the first few days of the year," Ives continues to say.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino.

Video Transcript

JULIE HYMAN: Let's broaden it out a little bit because one of the questions we've been talking about a lot in the first days of the year, kind of holding over from last year, is, where else are we going to see the opportunity in AI, right? Who else is going to be making money from this besides just NVIDIA?

And I know that you've had some calls on some companies before. Palantir is one of the ones you're very excited about. What's going to be the name that's going to benefit the most this year in that area?

DAN IVES: Yeah, because I think to your point, I mean, it was just the godfather of AI, Jensen, NVIDIA, as well as what Nadella has done in Redmond with the trophy case. This year, it's going to be about the rest of the tech.

I mean, when you look at software and chips, I think they lead tech higher. And you look at some of these names like MongoDB, the Messi of AI, Palantir, I look at names like Snowflake. That's another one you're seeing sentiment get much more negative.

What this is going to do to the chip sector in terms of this cycle, that could ultimately-- I think a lot of these chip names-- you're also going to see M&A significantly. And then you look at the install base plays. What's Benioff doing at Salesforce? Look at Adobe. Look at Oracle.

It's one where we believe it's a 1995 moment. It's the biggest tech transformation in the last 30 years. This is not hype. And I think this is really the start of a fourth industrial revolution. We believe the new tech bull market has begun, despite the bears winning a few battles the first few days of the year.

JOSH LIPTON: Palantir is an interesting one. So the Messi of AI.

DAN IVES: It's the Messi of AI.

JOSH LIPTON: I'm not a big soccer guy, but I feel like you're saying something positive. Let me ask you about that. It was a monster 2023 for Dr. Alex Karp and that crew at Palantir. But you say stick with it. It's still a buy in 2024.

DAN IVES: The best pure play. AI.

JOSH LIPTON: Why do you say that, Dan?

DAN IVES: Because from the work that we do, from a use case perspective, they're the first call. In other words, everyone focused on government and what they've done there, maybe some of the controversies. The reality is that they've leveraged that government expertise into enterprise. You could AI--

JOSH LIPTON: So you see the commercial just keep on growing?

DAN IVES: Right now. You don't see a major AI deployment where Microsoft, Palantir are not at least tip of the tongue in terms of some of these use cases. And that's our view. Our view is-- some will say Palantir is expensive. It's hype. This year, they prove it. And I think that's the key is this all plays out for what I continue to view as stock that could ultimately double over the next 12 to 18 months.

JULIE HYMAN: You've mentioned Microsoft in passing a couple of times. So I-- I want to come back to that one. When does Microsoft actually start making money from AI, right? There's a lot of buzz around it. But it's not-- there's no-- there's nothing flowing to the bottom line at this point from it, right?

DAN IVES: I think late January. You know, once-- when we look at earnings, I think the aha moment is going to be the monetization that comes from Copilot for Microsoft, sooner than many are expecting. We think for every 100 hours of cloud spend, our partners are telling us 35 to 40 incremental for AI.

And that's our view for Microsoft. This is going to get-- this is stock that's going to get rerated. And ultimately, the street could be underestimating cloud growth by $20 or $25 billion as you look out into 2025. I'm not saying that they're going to pound the sort of table with massive guidance coming out of the gate. They're going to continue as the tactician Nadella does, underpromise and overdeliver.

JULIE HYMAN: All right, Dan, thank you so much. Fun stuff.