UBS expects another strong year for global AI stocks

Published 20/02/2025, 13:02

Investing.com -- UBS analysts remain bullish on global AI stocks, predicting mid-teen returns in 2025, driven by accelerating AI adoption and strong investment commitments. 

In a note Thursday, the bank emphasized that “AI is the tech theme of the decade” and it sees continued upside despite the sector’s already impressive performance.

Since the launch of ChatGPT in late 2022, the NASDAQ 100 has surged over 84%, hitting fresh all-time highs. UBS attributes this to market confidence in the coexistence of low-cost and high-cost AI models, which serve different applications and further drive adoption. 

“We think there is more to go in the AI rally despite the strong performance so far,” they wrote.

For global markets (excluding China), UBS forecasts total AI spending to reach nearly $500 billion in 2026, with AI-related revenues matching that figure. 

The bank says this would create an estimated $1 trillion AI end-demand opportunity. Assuming a 35% operating margin, they estimate global AI operating profits could hit $350 billion next year. 

Based on their valuation model—applying a 30x multiple to next year’s operating profits, consistent with quality growth stocks—UBS projects the AI sector’s market capitalization to reach $10.5 trillion by the end of 2025, up from its current $9 trillion valuation.

They note that China’s AI sector, which had lagged due to regulatory pressures, has rebounded 25% over the past month, driven by excitement around DeepSeek’s low-cost, high-performance AI model. 

UBS expects low-teens annual returns for Chinese AI stocks over the next three years, with AI spending in China reaching $30 billion by 2028 and AI-related revenues hitting $50 billion.

Despite macro uncertainty, UBS remains optimistic, advising investors to “buy the dip in quality AI names” and favor large-cap AI leaders, cloud platforms, and semiconductor companies globally.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.