Swiss banking giant UBS is bullish on artificial intelligence as an investment theme. It forecasts mid-teens return for the overall sector in 2025.
Despite already delivering strong performance, UBS believes there is more to go in the artificial intelligence (AI) rally, calling it the «tech theme of the decade», according to a recent note by the chief investment office of its wealth management unit.
By 2026 – the fourth year since the «ChatGPT moment» – it forecasts that total AI spending for global markets excluding China will be close to $500 billion and related revenues will also reach this figure, resulting in the combined AI end-demend opportunity to be valued at close to $1 trillion. The operating profit opportunity is estimated to be around $350 billion, based on the lower end margin of cloud platforms (35 percent) and AI semiconductors (50 percent).
By assigning a 30x multiplier to next year’s profit, this would lead to an AI market capitalization of $10.5 trillion by the end of 2026, which would translate to mid-teen returns for 2025.
China Opportunity
Using the same metrics for China, the bank forecasts that AI spending by 2028 – the fourth year after the «DeepSeek» moment – would be around $30 billion with related revenues reaching $50 billion and operating margin at 20 percent or $16 billion.
At the same 30x multiplier, market capitalization would be $450 billion before 2028 or low-teens average returns per annum over the next three years.
Volatility Expected
Despite the positive outlook, UBS warns that periods of volatility are to be expected with uncertainty related to tariffs and export controls.
It advises investors to take advantage of such turbulence through structured strategies and by buying the dip in quality AI names. Currently, the bank favors large cap names, leading cloud platforms and semis globally. Within China, it believes the internet sector will outperform the broader market.
