AI demand will continue to drive tech stocks higher - UBS
Nvidia (NASDAQ:NVDA), the leading global semiconductor company by market capitalization, reported strong third-quarter earnings and provided a positive outlook for the fourth quarter.
The company also indicated that sales to China would decrease significantly due to export restrictions imposed by the Biden administration on advanced AI chips.
Nvidia again led a major tech rally in recent weeks with the stock increasing about 25% in the run-up to yesterday’s earnings report. While some consolidation is expected after recent sector outperformance, there are several reasons to consider maintaining positions in tech, according to analysts at UBS.
“As applications for AI expand to more industries, we expect more stocks within the tech sector to benefit, with software and internet stocks particularly well positioned to monetize their investment in AI,” analysts wrote.
They added that AI “will remain a driver of growth in demand for semiconductors into 2025.”
Hence, analysts are urging clients to consider adding to positions on any pullback in tech or chipmakers.
“We continue to like the software segment in particular given its defensiveness and our anticipation of broadening AI demand.”
In particular, the investment strategists remain bullish on software and AI-exposed stocks.
“The relative scarcity of AI capacity in the cloud is already helping drive revenue growth for platform cloud operators and expected sustained end-user demand for these non-commoditized AI services in the coming quarters,” analysts concluded.
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