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Value Investors Risk Missing Next Tech Wave, Wedbush's Dan Ives Warns

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  Published in Stocks and Investing on Friday, November 14th 2025 at 12:38 GMT by Seeking Alpha

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Valuation‑Focused Investors Will Miss the Next Wave of Transformational Tech, Wedbush’s Dan Ives Warns

In a recent piece on Seeking Alpha, Wedbush research partner Dan Ives delivers a cautionary note for the “value” crowd: the insistence on low multiples in the face of booming technology valuations will likely cost investors the next era of breakthrough growth. Ives’ analysis—grounded in Wedbush’s own research and a handful of external data points—argues that while many investors still prioritize traditional valuation ratios, the tech sector’s rapid evolution demands a different mindset. Below, we distill Ives’ key arguments, the evidence he marshals, and the implications for portfolio construction.

1. The “Transformation” Imperative

Ives opens by framing the current market environment as a “transformation epoch.” He points out that the next decade is expected to bring advances in artificial intelligence, quantum computing, autonomous vehicles, and biotechnology—domains that will reshape every industry. Wedbush’s proprietary models predict that firms leading in these areas will command premium valuations for the foreseeable future. In short, the “winner takes all” playbook is in full force.

“If you’re still looking for a cheap, high‑growth company that doesn’t need to pay the price of high growth, you’re going to miss a lot of the next big thing,” Ives writes.

The article references Wedbush’s own research note on AI‑driven companies (link included in the original article), which details how firms such as Nvidia, Alphabet, and even niche players like Palantir and Snowflake have shown revenue growth rates of 40–70% year over year, comfortably justifying multiples above the 40x P/E average of the S&P 500.

2. The Classic Valuation Paradox

Ives points out that the most common valuation metrics—price‑to‑earnings (P/E), enterprise value‑to‑EBITDA (EV/EBITDA), and price‑to‑sales (P/S)—often become less informative for transformational firms. For instance, a company like Tesla has a 100x P/E but is expected to hit over $100 billion in revenue within a decade. The conventional “rule of 20” (20% growth and a 20x multiple) is simply no longer a useful rule of thumb.

To illustrate this, Ives cites a chart (link in the article) that overlays the average multiples of five leading AI companies against the S&P 500 average. The spread, he explains, is widening by roughly 5x per year—an alarming trend for value‑oriented portfolios.

3. The Cost of a Low‑Valuation Bias

Ives underscores the opportunity cost of sticking to low valuations. In 2021, for example, the MSCI World Index’s growth‑segment companies were trading at 25% higher multiples than the rest of the market; by 2023, that premium had ballooned to 35%. The article provides a back‑tested portfolio scenario: a “value‑only” portfolio that filters out stocks above a 15x P/E or a 5x P/S ratio would have underperformed the S&P 500 by 6–8% annually from 2018 to 2023.

The analysis also touches on the risk of “valuation fatigue.” Many investors now fear that high multiples will collapse if the growth trajectory falters. Ives argues that the risk of a temporary dip is outweighed by the potential upside of holding a stake in a transformative company. He cites the experience of investors who held high‑growth stocks through the 2022 market correction, only to see those holdings recover and surge beyond pre‑correction levels by 2024.

4. A Balanced Approach: Growth + Discipline

Rather than abandoning all valuation discipline, Ives proposes a nuanced framework. He recommends:

Wedbush’s research team, according to Ives, has integrated these factors into a proprietary “Tech Value‑Plus Index” that has delivered 24% annualized returns over the past five years, outpacing the S&P 500 by roughly 12 points per year. The article includes a snapshot of the index’s holdings—mostly high‑growth tech firms—highlighting its concentration in AI, semiconductors, and cloud infrastructure.

5. Counter‑Arguments and Caveats

Ives does not dismiss valuation entirely. He warns that an over‑enthusiastic chase of growth can lead to “valuation bubbles” if macro fundamentals deteriorate. He cites the dot‑com era and the 2021 pandemic‑era rally as cautionary tales. The key, he emphasizes, is to “pair growth with realistic earnings expectations.” For instance, while AI may fuel revenue growth, the cost of training large language models can eat into margins. Investors must scrutinize cost structures.

The article references a LinkedIn post from Ives where he discusses the role of earnings forecasting, linking to Wedbush’s earnings model for 2025. The model shows a projected 40% YoY growth in revenue for Nvidia but a 15% decline in net margin—an insight that could help investors fine‑tune exposure.

6. Practical Takeaways for Portfolio Managers

1. Re‑evaluate the “Low‑Valuation” Screen: Replace hard cutoffs (e.g., P/E < 15) with a multi‑factor filter that incorporates growth projections, margin stability, and cash flow health.
2. Embrace a “Growth‑First” Tilt: Allocate a portion of the portfolio to transformational tech firms that meet the criteria above, even if they trade at high multiples.
3. Maintain Discipline: Use stop‑loss orders or trailing stops to protect against unforeseen macro downturns. Wedbush’s research suggests a 10–15% volatility cushion around tech holdings.
4. Monitor Macro‑Catalysts: Keep an eye on interest rates, supply‑chain constraints, and regulatory shifts that could impact technology valuations. Wedbush’s macro briefing (link included) covers upcoming Fed announcements and their potential tech implications.

7. Bottom Line

Dan Ives’ article is a clarion call for investors: the next wave of transformative technology will not be captured by a rigid adherence to low multiples. While valuation metrics remain essential, they must be contextualized within a broader framework that acknowledges the unique dynamics of high‑growth, high‑risk firms. By blending disciplined growth assessment with a willingness to accept premium valuations, investors can position themselves to ride the wave of the next decade’s most groundbreaking innovations.

For those seeking deeper insight, the original article links to Wedbush’s full research note on AI valuation dynamics and a supplemental blog post detailing the construction of the “Tech Value‑Plus Index.” These resources provide a data‑rich backdrop that further validates the arguments presented by Ives.