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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.