Dan Ives, a prominent tech analyst at Wedbush Securities, lowered his price target on Microsoft (MSFT) to $475 from $550 recently, citing his belief that spending on data centers will drop going forward.
Additionally, Ives, speaking on CNBC, suggested that the scenario for Big Tech over the longer term would be similar to what the sector underwent during the coronavirus pandemic.
A development team working together to create the next version of Windows.
Why Ives Expects the Big Cloud Players’ Spending to Fall
Spending on data centers by MSFT, Alphabet (GOOG), and Amazon (AMZN) is likely to fall 10% to 15%, while some capital expenditures are being paused, Ives said.
Many tech companies have significant exposure to China, and the high tariffs on the Asian country will make a large number of Big Tech firms’ projects much more expensive, the analyst indicated.
“China is the epicenter, and once you stop projects, the process snowballs,” making it difficult to restart initiatives, the analyst explained.
The Outlook for Big Tech
Ives expects Big Tech firms to report very weak Q2 results. Over the longer term, he plans to use “the Covid playbook” when it comes to assessing Big Tech companies. Specifically, the analyst will “throw out the next two or three quarters” and try to determine the “winners” based on their outlooks for 2026.
Meanwhile, Ives expects Big Tech stocks to be very volatile for the next few weeks.
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This article is originally published at Insider Monkey.
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