UBS Forecasts Massive Growth for AI Stocks & Semiconductor Companies
Artificial Intelligence (AI) stocks and semiconductor companies could experience significant growth, according to a forecast by UBS Global Wealth Management. The firm predicts that these sectors will continue to be the big winners in 2024 and beyond.
UBS anticipates a 15-fold increase in global AI revenues between 2022 and 2027, reaching a staggering $420 billion. This growth is expected to boost AI stocks. Solita Marcelli, UBS Chief Investment Officer for the Americas, specifically highlights the high demand for AI computing and graphics chips in the next 12 to 18 months.
Semiconductor companies are also expected to see substantial profit growth, with UBS forecasting 50% profit growth for the sector. Software companies, with operating margins of over 30%, are expected to experience nearly 20% profit growth by 2024. UBS’s report references comments from Taiwan Semiconductor, noting that the demand for graphics chips exceeds supply. Additionally, UBS observes increased AI chip spending by major tech companies, further supporting the projected growth.
With the increasing demand for AI chips and the strong outlook for the sector, UBS believes that AI will be a significant investing theme for the next decade. Mark Zuckerberg, the Founder and CEO of Meta Platforms, revealed that the company is investing billions of dollars in AI chips.
While chip stocks are currently trading at around 25% higher than their five-year average, UBS considers these higher valuations to be justified. The firm points out that semiconductors stocks have a reasonable price-to-earnings (P/E) ratio of 22.
In terms of specific AI stocks, Nvidia, a leading chip manufacturer, has reached record highs. The stock is extended from a flat base with a 505.48 buy point and is approaching a 20% profit target from that entry. Broadcom, another prominent chip company, has surpassed the 5% buy zone of an ascending base’s 1,151.82 buy point. Taiwan Semiconductor, a chip foundry leader, recently surpassed a cup-with-handle buy point due to its bullish outlook. Advanced Micro Devices, after reaching an all-time high, experienced a pullback on Monday but remains extended from its latest buy point.
In summary, UBS Global Wealth Management projects a massive growth potential for AI stocks and semiconductor companies. With the demand for AI chips on the rise and the positive outlook for the sector, these industries are expected to be the big winners in the coming years and the next decade.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Please consult with a professional financial advisor before making any investment decisions.
