UBS: Market Underestimates Duration of AI Cycle, 2027 May Mark Inflection Point for Investment Returns

BlockBeats news, November 2 - According to Bloomberg, Gerry Fowler, UBS's chief European equity strategist and head of derivatives, stated that the market underestimates the duration of the AI cycle, and AI trading remains robust. He pointed out that some hyperscale cloud providers have valuation multiples below 20 times, while revenue is still growing 10% to 20% annually, reflecting quite pessimistic market expectations, so many investors are still willing to re-buy AI-related assets.

Fowler believes that massive AI spending may be approaching the stage where it begins to generate returns, with a potential inflection point in 2027: data center deliveries are expected to release backlogged orders, driving revenue to gradually catch up with capital expenditures. He stated 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 an overly short AI cycle.

Regarding the next stage of beneficiaries, Fowler focuses more on global and European industrial companies helping to build new factories. He noted that many infrastructure suppliers for cables, power equipment, etc., have orders booked through 2027 or even 2028, with limited room for further upward revisions in earnings forecasts. ASML benefits by supplying equipment to memory manufacturers expanding production, such as Samsung Electronics and SK Hynix, rather than directly supplying data centers; he stated that ASML and some European industrial companies are seeing upward earnings revisions.