Nvidia and other AI stocks could continue to be big winners if UBS Global Wealth Management's outlook is correct. The firm sees artificial intelligence, semiconductor and software stocks as the big winners this year and into the next decade.
UBS sees chip and AI stocks continuing to outperform, and even strengthen, in 2024 and beyond.
Huge Sales Jump Will Drive AI Stocks
In a report Monday, analysts forecast global AI revenues will soar 15-fold between 2022 and 2027, from $28 billion to $420 billion, lifting AI stocks. Solita Marcelli, UBS chief investment officer for the Americas, sees particularly high demand for AI computing and graphics chips in the next 12 to 18 months.
UBS forecasts 50% profit growth for semiconductors and nearly 20% for software companies with operating margins of more than 30% in 2024.
The report referenced comments from Taiwan Semiconductor noting demand for graphics chips is higher than supply. UBS also noted higher AI chip spending by Big Tech companies. For these reasons, UBS thinks AI could be the big investing theme that spans over the next decade.
Meta Platforms founder and CEO Mark Zuckerberg said the social media company is spending billions of dollars on AI chips, according to the report.
Nvidia Stock Could Benefit; Semis Not Overvalued
UBS added that chip stocks are trading at about 25% higher than their five-year average, but it sees the higher valuations as justified. The firm says semiconductors stocks are trading at a reasonable 22 price-to-earnings (P/E) ratio.
Meanwhile, among other AI stocks, chip leader Nvidia is at record highs. Shares are extended from a flat base with a 505.48 buy point. Nvidia stock breached the 600 level Monday, nearing the 20% profit target from that entry.
Broadcom topped the 5% buy zone of an ascending base's 1,151.82 buy point.
Chip foundry leader Taiwan Semiconductor gapped past a cup-with-handle buy point last week amid its bullish outlook. Advanced Micro Devices pulled back Monday after reaching an all-time high on Friday. It's also extended from its latest buy point.
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