Rising AI adoption, improving monetization to drive the next leg of AI rally: UBS

Investing.com -- Rising adoption rates and improving monetization trends are poised to drive the next leg of the artificial intelligence rally, according to UBS strategists, who see continued tailwinds for software and internet companies as AI use becomes more mainstream across U.S. businesses.

U.S. AI adoption has accelerated in recent quarters, rising from 5.7% in the third quarter of 2024 to 9.2% in the second quarter of 2025, based on data from the U.S. Census Bureau’s Business Trends and Outlook Survey.

UBS expects adoption to surpass 10% by year-end—a threshold it notes took e-commerce 24 years to reach. The bank highlights that certain sectors such as computing, web search, and media are already reporting adoption rates of 25–30%.

Despite this sharp increase, UBS believes the theme remains in its early stages. “A peak in overall AI adoption is still a long way off, in our view. Hence, we recommend that investors keep AI as part of their core tech holdings,” analysts wrote.

UBS recommends diversified exposure across three layers of AI—enabling, intelligence, and application—with rising monetization expected to benefit the latter two most.

Software (ETR:SOWGn) and internet companies, more exposed to the intelligence and application layers, are seen as better positioned than cyclical semiconductor names that dominate the enabling layer.

The firm has adjusted its AI portfolio accordingly, reducing exposure to the enabling layer to 40–50% from 50–60% last year, while increasing allocation to the application layer to 30–40% from 20–30%. Exposure to the intelligence layer remains steady at 15–20%.

Beyond public markets, UBS also points to private market opportunities in venture capital, private equity, and real assets.

“Venture capital firms invest in innovative but often unprofitable startups at the forefront of AI intelligence and development, while private equity managers tend to invest in mature companies with proven applications and established revenues,” the strategists said.

“Real asset funds—whether infrastructure or real estate—focus on the underlying technologies and systems that enable AI development, such as data centers, cloud computing, telecommunications, and electricity generation,” they added.

These segments typically attract established public companies with strong track records and substantial financial resources.

In sum, UBS believes that a barbell strategy—balancing listed AI leaders with private market exposure—can offer both innovation and stability.

However, it emphasizes that investors should carefully assess the risks linked to private markets before committing capital.