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Nasdaq 19,000, Apple and Microsoft at $3 Trillion and Metaverse Mania

Nasdaq 19,000, Apple and Microsoft market caps above $3 trillion, and metaverse mania: Wedbush's Dan Ives and his team give their top 10 tech predictions for 2022.

The Nasdaq at 19,000, Apple  (AAPL) - Get Apple Inc. Report and Microsoft  (MSFT) - Get Microsoft Corporation Report market caps of more than $3 trillion, and a ubiquitous metaverse, especially after Apple releases its highly anticipated Apple Glasses.

Those are just some of the top 10 predictions Wedbush Securities’ analyst Dan Ives and his team expect to see next year. 

In a note to clients Tuesday, the influential Wall Street tech analyst laid out his base case for how tech will look at the end of 2022, despite concerns about what the Federal Reserve may do to rein in inflation and current unknowns about Omicron.

"While many are throwing in the white towel on this multi-year historic tech rally heading into 2022, we view this near-term sell off as just a painful digestion period (along with Omicron fears) with the Street now factoring in a tighter Fed and constrained valuation framework for tech stocks,’ Ives and his team said, noting they remain “firmly bullish on tech stocks for 2022.”

Here are Ives’ top 10 tech predictions for next year:

1. Apple will finally unveil its AR/VR headset Apple Glasses in the summer 2022 and will result in another major growth catalyst for the stock as further monetization of its golden Cupertino installed base takes hold.

2. Our 2022 year-end target for NASDAQ is 19K driven by the digital transformation among enterprises and consumers. While valuation parameters will be more in focus on the Street, importantly the underlying growth prospects for the tech sector are 2x-3x normalized/historical patterns.

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3. The metaverse will morph from hype to reality as more tech stalwarts such as Facebook  (FB) - Get Meta Platforms Inc. Class A Report, Apple, Alphabet-owned Google  (GOOGL) - Get Alphabet Inc. Class A Report, and Microsoft heavily invest billions in this theme over the next year. We expect significant M&A activity on this front.

4. The cloud arms race will continue going after this $1 trillion of spending for the next decade with Amazon  (AMZN) - Get Amazon.com, Inc. Report, Microsoft, and Google leading the way followed by Oracle  (ORCL) - Get Oracle Corporation Report and IBM  (IBM) - Get International Business Machines Corporation Report. With currently 43% of workloads on the cloud based on our estimates, we believe by the end of 2022 this figure will cross the 50% threshold as more enterprises/governments head towards the cloud.

5. We believe cybersecurity budgets will increase 21% in 2022 which is roughly a 100 bps YoY increase from a robust 2021 based on our recent checks. Our favorite plays on the cyber security sector heading into 2022 are Zscaler  (ZS) - Get Zscaler, Inc. Report, Tenable  (TENB) - Get Tenable Holdings, Inc. Report, CyberArk  (CYBR) - Get CyberArk Software Ltd. Report, Varonis  (VRNS) - Get Varonis Systems, Inc. Report, Sailpoint  (SAIL) - Get SailPoint Technologies Holdings, Inc. Report, Fortinet  (FTNT) - Get Fortinet, Inc. Report, and Palo Alto Networks  (PANW) - Get Palo Alto Networks, Inc. Report.

6. M&A will surge in 2022 among both strategic/financial buyers. Our top 5 M&A candidates for 2022 in tech are Cerence  (CRNC) - Get Cerence Inc. Report, Matterport  (MTTR) , Varonis, Rapid7  (RPD) - Get Rapid7 Inc. Report, and Sailpoint.

7. The chip shortage out of Asia will significantly moderate in 1H22 and remove a major overhang on the tech sector. We view Apple and chip players as the best springboard bets to benefit from this key dynamic easing.

8. ​The regulatory environment both in the Beltway and Brussels will pose a threat to FAANG names around anti-trust and monopolistic concerns. We believe these regulatory issues will largely result in fines (led by the EU) and constrained M&A prospects, rather than any structural break-ups of these tech stalwarts.

9. China tech remains a very treacherous investing space for global investors given the massive scale and scope of the unprecedented regulatory crackdown from Beijing. The impossible to predict actions out of Beijing will continue to result in more global investing dollars rotating from China tech to US tech stocks in 2022.

10. Apple followed by Microsoft will both eclipse the $3 trillion market cap threshold in 2022.