UBS talks about investor undercorrection, including the quality of AI leaders
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Analysts at UBS said Friday that the investment case for AI still stands. The bank said companies with a clear AI roadmap are benefiting from structural winds.
“We believe the investment case, including technology and AI, remains valid and recommend leveraging the undercollection of quality AI leaders as a buying opportunity,” the company wrote.
UBS believes AI monetization trends are improving and capex trends remain strong, with Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) seeing accelerated cloud growth compared to previous quarters and increasing contributions from AI. He said it was because of this.
“Furthermore, we are also seeing a widespread increase in AI-related capex,” argued UBS analysts. “Microsoft and Alphabet's firm commitment to growing high AI capex and comments from TSMC and Meta CEO Mark Zuckerberg on demand for AI-related chips support our positive near-term outlook for AI infrastructure.”
Banks say most AI-related spending is focused on the infrastructure layer due to the need to build and train huge datasets, with infrastructure spending driven by emerging trends in the use of graphics processing units in cloud servers and AI edge computing. A compound annual growth rate (CAGR) of % is expected.
“With broadening AI demand and increasing monetization trends, we believe the applications and models segment will emerge as a dominant force in the long term,” UBS said. “We anticipate a 152% CAGR for AI applications and models from 2022 to 2027.”
Overall, they forecast global AI revenues to increase 15-fold from 2022 to 2027, from $28 billion to $420 billion.