Billions of dollars of investment into artificial intelligence is set to propel tech stocks to yet another year of bumper gains, according to analysts at UBS. UBS wrote in a note on Friday that while 'the easy gains in AI may well be behind us', the rally 'looks far from over'.
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The investment bank also tipping the world's biggest tech companies to make progress on converting capital expenditure into profitability this year. The AI boom helped the world's biggest tech outperform the wider market during a 2024 otherwise characterised by macroeconomic uncertainty and geopolitical turmoil.
US tech index, the Nasdaq, added around 33 per cent in 2024, with the likes of Apple, Amazon and Tesla up by 30 to 70 per cent each, and chipmaker Nvidia up by an incredible 190 per cent. The so-called Magnificent Seven tech giants were responsible for more than half the S&P 500's gains in 2024.
By contrast, the tech-light FTSE 100 added just 5.7 per cent, while the Eurostoxx 600 index was up 6.4 per cent. UBS: 'Gap between AI capex and revenues will narrow in 2025'. UBS wrote: 'While the easy gains in AI may be behind us, we think this rally looks far from over.'.
The bank thinks AI-related capex from the four biggest tech companies - Amazon, Apple, Alphabet and Meta – will continue to propel gains in the near term, with spending having grown 51 per cent year-on-year to $224billion last year. UBS forecasts 25 per cent year-on-year growth in 2025 to $280billion.
