U.S. stocks fell sharply last week, but rebounded early this week, rising 2.1% in the first two days alone. Tech stocks similarly recovered some of their losses, with the Nasdaq up 2.6%.
Looking ahead, investors' attention will be on upcoming Big Tech earnings reports, which will be closely scrutinized for insight into the latest monetization and capex trends in the generative artificial intelligence (AI) space. It will be.
UBS strategists said such an outcome, if it falls short of market expectations, could lead to renewed volatility.
“However, we believe this week's new numbers and corporate guidance are likely to further solidify our positive view on the AI theme and the global technology sector as a whole,” they added.
Strategists suggested that despite recent fluctuations, the fundamentals of AI remain intact and capital spending on AI infrastructure by big tech companies continues to accelerate.
This suggests that UBS's previously announced $300 billion in global data center capital spending for 2024 “may be conservative,” said strategists led by Mark Hefele.
Monetization through AI is on the rise
There are increasing signs that AI monetization is on the way, the investment bank said.
“German software company SAP this week reported a 25% increase in cloud revenue, supported by AI demand. This points to a strong trend in AI monetization, and we expect to see further evidence of that this week. ”, the strategists wrote.
“Separately, a recent U.S. Census Bureau survey of 1.2 million companies showed a sharp increase in AI adoption in the first quarter compared to previous results in the September 2023 quarter. '' he added.
remove ads
.
UBS said last week's sharp selloff left global tech stocks at just 22.5 times expected 2025 earnings, down from nearly 25 times earlier this year.
Strategists say the recent 10% valuation revision is an “attractive entry point for investors seeking long-term opportunities” as the sector's annual earnings growth could exceed an estimated 18% year-on-year. I think it will become.
“As such, we do not take any single company view and remain positive on AI trends, prioritizing leading technologies that are well-positioned in the market. We support the department,” the UBS team said.
