The demise of a Silicon Valley bank may spell an existential crisis for many startups this year, but for big tech, it’s a boon as investors flock to established names, an analyst said Friday. While that may be confusing for bearish investors, Wedbush analyst Dan Ives said last week’s dynamics — the collapse of SVB Financial Corp. SIVB, and Silicon Valley Bank, and Signature Bank, uncertainty in the regional banking sector, and a good earnings season for fairly tech names — Set a “compelling risk/reward headline for the rest of the year for high-quality tech names.” “While that sounds like twilight zone commentary to many investors; tech stocks have become the new safety net with big tech names being the main beneficiaries of this dynamic,” Wedbush analyst Dan Ives said in a note Friday. One stock that Ives supports is Microsoft Corp. MSFT. , +0.73%, was on track to turn in its best week in nearly eight years amid the banking crisis and the growing popularity of OpenAI’s ChatGPT artificial-intelligence application, which Microsoft is using to power its Bing search engine and Office 365 products. . Read: Microsoft stock on track for best week in 8 years “Large-cap tech and sub-sectors like cloud and cybersecurity are seeing more resilient growth than the Street expects,” Ives said. “While budgets are under pressure across the board, enterprises have green-lit projects and deployments in 2023 and many budgets now. The numbers for 2023 have been mocked by management teams and these tech stocks are under owned and still in that camp in our view. Also, Ives said that with the possibility of another Fed rate hike next week “now the rest of the year is baked into a handcuffed Fed on its rate hike path that needs to pause and cut heading into the end of the year given the cracks (SVB, signing, etc.) ) seen in the financial system over the past few weeks. Given that, Ives said he still expects tech stocks to rise 20% or more in 2023 “and still have nice upside this year.” The tech-heavy Nasdaq Composite Index COMP, -0.68% is already up 11% on the year, compared with a 2% gain on the S&P 500 index SPX, -1.01% . In cybersecurity, Ives said that Palo Alto Networks Inc. PANW, -0.36%, Check Point Software Technologies Ltd. CHKP, +0.17%, CyberArk Software Ltd. CYBR, -1.58% Tenable Holdings Ltd. TENB, prefers names like – 1.54%, Zscaler Inc. ZS, -3.05% , and CrowdStrike Holdings Inc. CRWD, -0.06%. Read: ‘High proportion’ of startups could fold by year-end following Silicon Valley bank failure, Morgan Stanley says In addition to Microsoft, Ives said his top cloud picks for 2023 are datadog DDOG, -0.45% , MongoDB MDB, -1.04 % and Salesforce Inc. CRM, -1.37% , while Apple Inc . AAPL, -0.41% “remains firm” as its top tech pick for 2023, and Tesla Inc. TSLA, -2.23% remains his “favorite disruptive tech name.” Established names have a definite edge over late-stage startups as many need to rethink their funding plans and timelines for going public, as evidenced by privately held fintech company Stripe’s announcement of a $6.5 billion funding round to provide liquidity to current and former. Employees have reduced the company’s valuation to $50 billion, from about half of the $95 billion two years ago. Year-to-date, ETFMG Prime Cybersecurity ETF HACK, -0.99% is up 2.2%, First Trust Cloud Computing ETF SKYY, -1.02% is up 9%, iShares Advanced Tech-Software ETF IGV, -0.44% is up 12%.
