According to Melius Research, a number of major players in the technology industry, such as Apple and AMD, are expected to conclude 2024 with strong returns after a sluggish start to the year. In their research report on Monday, Melius analyst Ben Reitzes stated that there may be a potential replay of the previous year, where certain underperforming stocks make a resurgence. This "catch-up" trade is anticipated in semiconductor, hardware, and software sectors, particularly for companies with lower expectations. The VanEck Semiconductor ETF experienced a significant increase of 50% in the first half of 2023, but only saw a further 15% rise in the second half of the year as expectations were digested. However, underdogs like Intel and IBM performed well in the latter half of the year, suggesting that this year's rally in semiconductors could lead to a similar rebound for lagging stocks. In the first half of 2024, the semiconductor ETF rallied by 49%, while the software index ETF added 7%, whereas the broader S&P 500 rose by around 15%. Melius Research believes that companies such as Advanced Micro Devices, Intel, Apple, and IBM could benefit from this catch-up trade as they all underperformed the broad-market index in the first half of the year. The introduction of fresh product cycles and the increased demand for AI-related hardware are expected to further boost these companies. Reitzes specifically highlights IBM as best positioned for a comeback this year due to its revenue being largely derived from software and the expected increase in infrastructure software spending. According to the analyst, application software is at risk in the long-term due to AI factories and coding tools that simplify app development, potentially impacting SaaS companies charging extra for AI tools amidst rising inflation.

On the other hand, infrastructure software is deemed less vulnerable to disruption. Although IBM shares have only increased by almost 9% this year compared to the broader market's gains, Reitzes' $210 price target suggests an 18% potential upside over the next year. Reitzes also anticipates that Apple, AMD, and Intel will benefit from upcoming product cycles and a reduction in cloud capital expenditure spending. For Apple, the analyst believes that the release of the iPhone 16 in September, with its "Apple Intelligence" AI capabilities, will be favored by consumers. Reitzes sets a price target of $260 for Apple, indicating a potential upside of 14% from Monday's closing price. Intel and AMD are expected to benefit from the rising demand for AI-driven technology in the personal computer market, with Intel's Lunar Lake chip and AMD's Strix Point processor predicted to gain momentum by the fourth quarter. Additionally, Intel's new Xeon chips and AMD's Turin processors could contribute to improved performance in traditional servers. Reitzes suggests that AMD may be a preferable option for investors due to lower expectations for its AI accelerators and the absence of Intel's "foundry" overhang. However, Intel is seen as undervalued leading up to what could be a seasonal bounce, with Dell also benefiting from improved Intel product cycles. Reitzes' price targets for Intel and AMD indicate potential advances of approximately 16% and 22% respectively over the next year.