UBS says AI investment cycle is broadening even as market grows more selective on returns Proactive uses images sourced from Shutterstock
The bank sees the next phase of the AI trade rewarding execution and returns rather than mere exposure to the theme, and retains an attractive view on US equities with an S&P 500 target of 7,500
Fresh evidence of surging capital flows into artificial intelligence has prompted UBS to argue that the AI investment cycle is broadening across funding, hardware and enterprise adoption, even as investors grow more discriminating about where returns will accrue.
In its latest House View note, UBS highlighted Amazon’s commitment to invest up to $25 billion more in Anthropic, the AI safety company, alongside Anthropic’s pledge to spend more than $100 billion over the next decade on Amazon’s cloud infrastructure.
The bank also noted reports that a separate Bezos-backed AI laboratory is close to raising $10 billion at a $38 billion valuation, while Recursive Superintelligence, a four-month-old frontier AI lab, has raised at least $500 million at a $4 billion valuation.
Those deals follow a first quarter in which AI-related venture activity helped lift global start-up investment to a record $300 billion, according to data from research firm Crunchbase.
On the hardware side, UBS pointed to the Philadelphia semiconductor index rallying for 16 consecutive sessions, advancing more than 35% during the period, while South Korean semiconductor exports surged more than 180% year over year in the first 20 days of April.
The bank said it remains constructive on memory, advanced semiconductors and enabling infrastructure, supported by earnings visibility through 2026 and into 2027, though it cautioned that some parts of the hardware chain have already re-rated sharply and that rotation within the theme is likely.
For software and consumer hardware companies, UBS said the challenge is shifting from having an AI narrative to demonstrating that it can drive products, workflows and returns, arguing that widespread software disruption is more likely a long-tail scenario than an immediate one, particularly for enterprise-facing providers with sticky customer relationships.
On private markets, UBS said the latest funding announcements reinforce its view that AI remains a multi-year investment cycle, but cautioned against broad optimism, recommending a selective and diversified approach given concentration risks in popular AI themes.
UBS retained its attractive view on US equities overall, with an S&P 500 target of 7,500 for December, continuing to favour the consumer discretionary, financials, healthcare, industrials and utilities sectors.