The tech sector is in focus as leading AI company Nvidia (NVDA) prepares to report earnings on Wednesday. With expectations around AI growing throughout the tech sector, investors are eager to see when companies will begin to see returns on their investments.

RBC Capital Markets managing director of software equity research Rishi Jaluri joins Catalysts to discuss his outlook on the tech sector and AI expectations.

Jaluria believes seeing near-term returns on AI investments will be "really tricky." However, he argues it's better for these companies to overinvest rather than underinvest, stating, "This is truly a generational technological shift," and emphasizing that investors must have patience.

Despite the general caution, Jaluria identifies only one company he believes will significantly monetize generative AI over the next twelve months: Microsoft (MSFT). He outlines three key factors necessary for Microsoft to see AI growth. First, the company needs to show investors acceleration or what AI could look like within the Azure business without capacity constraints. Second, other software companies need to develop AI modules, as Microsoft stands to benefit from this ecosystem growth. Finally, Jaluria emphasizes the importance of "actual usage and adoption of AI in Microsoft's portfolio outside of the Azure line."

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This post was written by Angel Smith