Dan Ives: Tech Has 15% More Upside in 2026 and AI Trade Is in "3rd Inning"

Dan Ives said the AI trade is only in the "third inning" and still has about 15% upside left for tech stocks into the remainder of 2026. He highlighted Palantir as his top non-Magnificent Seven pick and sees it as a potential trillion-dollar company within two to three years, while noting software stocks may offer a value catch-up opportunity. The piece is broadly constructive for AI-related and software names, but it is commentary rather than company-specific financial news.

Analysis

The market is likely underpricing how broadening AI spend changes the winners list. Once the trade moves from hyperscaler-led capex to monetization, the marginal beneficiaries become the “plumbing” names with high operating leverage to enterprise deployment cycles: legacy hardware, networking, and security-adjacent software. That favors a rotation away from the narrow mega-cap basket and into second-derivative names where expectations are still lagging fundamentals.

Palantir stands out because it is one of the few software names with both narrative torque and a credible path to being treated like a platform rather than a point solution. The risk/reward is asymmetric if AI adoption stays enterprise-led for another 12-24 months, but the valuation also makes it the first name vulnerable to any slowdown in spending cadence or a miss in commercial growth. In other words, it is a momentum asset with duration risk: it can compound quickly, but it can also re-rate violently if growth normalizes.

The more interesting setup may be in the neglected software cohort. If capex continues but broad software participation improves, there is room for catch-up in names and vehicles that have not yet been priced for an AI monetization cycle. The contrarian point is that the market may still be too focused on compute winners and not enough on software distribution and workflow capture, where revenue visibility improves only after deployment budgets convert into seat expansion and upsell.

The key reversal signal is not a single weak quarter, but any evidence that management teams shift from reiterating spend to optimizing it. That would indicate the trade is moving from early-cycle expansion to late-cycle scrutiny. The next 1-2 earnings seasons should therefore be decisive: continued capex affirmation should support multiple expansion, while even modest pullbacks could hit the highest-duration software names first.

Key Decisions for Investors

• Long PLTR on pullbacks over the next 2-6 weeks; target a 15-20% upside move if enterprise AI budgets remain intact, but cut quickly on any guidance deceleration because the name trades on future-duration multiple expansion.
• Initiate a basket long of INTC/CSCO/DELL versus short a mega-cap AI basket proxy over 1-3 months; the trade expresses second-derivative beneficiaries catching up while limiting exposure to the most crowded leaders.
• Buy XSW as a medium-term catch-up vehicle for under-owned software exposure; use a 3-6 month horizon and look for 10-15% upside if capex commentary stays constructive across earnings season.
• For more convex exposure, buy near-dated PLTR call spreads into the next earnings cycle; favorable if the stock keeps re-rating on AI platform narrative, but define risk because implied volatility is likely elevated.
• If upcoming capex commentary turns cautious, rotate out of high-multiple software and back into cash-generative semis/hardware only on dips; the first-order drawdown should be treated as a signal that AI monetization is taking longer than the market expects.