AI and Semiconductor Stocks Poised for Major Growth, UBS Predicts

A new report from UBS Global Wealth Management paints a promising picture for AI, semiconductor, and software stocks.

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ZURICH, CH – A report released on Monday by UBS Global Wealth Management forecasts a significant surge in AI, semiconductor, and software stocks, driven by a predicted 15-fold increase in global AI revenues from $28 billion in 2022 to $420 billion by 2027. Companies like Nvidia (NVDA) are expected to be major beneficiaries.

AI Revenue Surge: A Catalyst for Growth

UBS analysts revealed an astonishing forecast: global AI revenues are set to increase 15-fold from $28 billion in 2022 to an astounding $420 billion by 2027. This growth is anticipated to propel AI stocks to new heights.

Solita Marcelli, the chief investment officer for the Americas at UBS, highlighted the burgeoning demand for AI computing and graphics chips over the next 12 to 18 months as a key driver of this surge.

Semiconductor and Software Companies: A Profitable Future

UBS's outlook for semiconductor and software companies is equally robust. The firm expects a 50% profit growth for semiconductors and a nearly 20% increase for software companies in 2024, coupled with impressive operating margins surpassing 30%.

Taiwan Semiconductor (TSM) has noted a significant imbalance, with the demand for graphics chips outstripping the supply. This mismatch is mirrored in the increased spending on AI chips by major tech companies, further bolstering UBS's stance on AI as a dominant investment theme for the next decade.

Meta Platforms (META), led by founder and CEO Mark Zuckerberg, is reportedly investing billions in AI chips, aligning with the broader industry trend towards increased expenditure in this area.

Stocks to Watch

UBS remarks that while chip stocks are trading about 25% above their five-year average, the elevated valuations are seen as justified. They highlight that semiconductor stocks are currently trading at a reasonable 22 price-to-earnings (P/E) ratio. Nvidia, a leader in the AI chip market, has seen its shares reach record highs, indicating strong investor confidence.

Other significant players in the market are also showing promising trends. Broadcom (AVGO) has surpassed the buy zone of an ascending base, while Taiwan Semiconductor has shown bullish prospects. Advanced Micro Devices (AMD), after reaching an all-time high, is also extending from its latest buy point.