Investing.com -- UBS has adjusted its "Global Equity Focus List," reducing exposure to several prominent Big Tech stocks while increasing allocations to semiconductor firms.
Despite recent solid gains in the AI sector, UBS remains optimistic about the long-term growth potential of artificial intelligence, declaring it as the "most profound innovation in human history."
The investment bank’s note highlights the early stage of the AI growth story, with broad investment opportunities across three AI layers: enabling, intelligence, and application.
UBS analysts point to strong tactical drivers over the next 12-18 months, including robust capital expenditure growth and improving monetization prospects.
The changes to the Focus List include the addition of NXP Semiconductors (NASDAQ:NXPI) with a 0.5 percentage point (ppt) weight. Conversely, UBS has reduced the weightings for Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ:META), and Oracle (NYSE:ORCL) by 0.5 ppt each. In contrast, Broadcom (NASDAQ:AVGO) and Micron (NASDAQ:MU)'s weightings have been increased by 0.5 ppt each, and NVIDIA (NASDAQ:NVDA)'s by 1 ppt.
UBS emphasizes its preference for AI infrastructure companies with strong pricing power and competitive positioning, along with platform and application beneficiaries that are well-placed for AI-related use cases.
The analysts draw a parallel between the launch of ChatGPT and past technological inflection points like the Netscape browser for the internet and Windows for the PC.
Looking forward, UBS expects the AI market to potentially reach a trillion-dollar annual revenue threshold over the next decade.
“Estimates for the size of the AI market vary widely, but most agree that annual AI-related revenues could reach the trillion-dollar threshold over the next decade,” said UBS.
The report also underscores AI's potential to significantly boost productivity, with estimates suggesting a substantial increase in real GDP per worker, driven by generative AI adoption.