The commencement of the artificial intelligence era is only in its infancy, poised to propel technology stocks to greater heights throughout the remainder of the decade, as per a report from UBS released on Tuesday.
UBS anticipates that AI technologies will permeate a wide array of industries, becoming integral components of numerous products in the coming years. This widespread integration is expected to fuel the demand for an increasing array of tech products and services.
Solita Marcelli, the chief investment officer of UBS Global Wealth Management, expressed confidence in the ongoing growth trajectory of AI technologies, asserting that we have merely scratched the surface of the AI narrative. She believes that the favorable environment will persist as a supportive force.
Recent advancements in AI-driven features have been identified as significant catalysts for the tech sector, according to the report. For instance, Microsoft’s forthcoming introduction of Copilot for consumers priced at $20 per month will leverage the company’s AI capabilities across Microsoft Word, Excel, and Powerpoint applications.
Additionally, the tech behemoth recently unveiled a groundbreaking update to its keyboard after three decades, incorporating a dedicated button to activate Copilot instantly.
Volkswagen has disclosed plans to integrate ChatGPT into its vehicles for the in-car voice assistant, while Samsung and Hyundai have revealed a cutting-edge smart home concept driven by AI technology.
Marcelli projected that 2024 will witness the democratization of AI, with a surge in broader AI edge-computing or on-device AI computing. This development is poised to bolster tech sector profits in the current year, subsequently translating into heightened stock valuations. Notably, positive feedback from management teams at the recent CES conference has bolstered Marcelli’s confidence in her forecast of a 10% earnings growth in the fourth quarter of 2023, accelerating to a mid- to high-teens growth in subsequent quarters.
The report also highlights the potential for more companies to capitalize on their AI exposure, with investors keen on assessing how firms can sustain or enhance their profit margins.
UBS envisions a substantial uptick in AI industry revenues, projecting a 15-fold increase from \(28 billion in 2022 to \)420 billion by 2027. This robust growth trajectory is expected to augur well for the broader tech sector in the coming years.
Marcelli emphasized that AI could emerge as the defining technological theme of the decade, offering unparalleled growth prospects compared to other themes. She believes that AI will continue to be the primary driver of global tech stocks in the foreseeable future.
For those seeking to capitalize on the AI trend, Marcelli recommends concentrating investments in the semiconductor and software sectors, while also exploring opportunities in memory and AI edge-computing.
