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UBS: The Market Is Underestimating AI the duration of the cycle, 2027 the year may see a turning point in investment returns
BlockBeats reported that November 2, according to Bloomberg, Gerry Fowler, UBS's Chief European Equity Strategist and Head of Derivatives, said that the market has underestimated the duration of the AI cycle, and that AI trading remains resilient. He noted that the valuation multiples of some hyperscalers have fallen below 20 times, while revenue is still growing by 10%to 20%annually, reflecting highly pessimistic market expectations. As a result, many investors remain willing to buy back into AI-related assets.
Fowler believes that massive AI spending may be approaching the stage at which it begins to generate returns, with 2027 potentially marking a turning point: Data center deliveries are expected to release backlogged orders, gradually bringing revenue into line with capital expenditure. He said that cash has not disappeared from the market, but has shifted to suppliers such as memory chip manufacturers, which are beginning to return cash to investors. The market's pricing of memory chip companies also reflects what he considers to be an overly short AI cycle.
For the beneficiaries in the next phase, Fowler is more focused on global and European industrial companies helping to build new factories. He noted that orders for many infrastructure suppliers, including cable and power-equipment providers, are already booked through 2027 and even 2028, leaving limited room for further upward revisions to earnings forecasts.ASML benefits by supplying equipment to memory manufacturers expanding production, including Samsung Electronics and SK SK hynix, rather than by directly supplying data centers; he said that ASML and some European industrial companies are receiving upward revisions to expectations.
Original link https://m.theblockbeats.info/flash/375025