In recent years, there has been a surge in interest and investment in artificial intelligence (AI) technologies. The potential for AI to revolutionize various industries has attracted significant attention and investment from both venture capitalists and established firms.
UBS, a Swiss investment giant, shares those views. Indeed, analysts at UBS said the broader AI hardware market could hit $90 billion in valuation by 2025, expanding at a compound annual growth rate (CAGR) of 20%, in a new market research report published on Friday, May 12.
The bank said it considers AI “a horizontal technology” that will likely have significant use cases across different industries and applications.
AI, big data, and cybersecurity likely to see “faster adoption”
In general terms, the AI market currently has an estimated market share of $207.9 billion, and that figure is expected to skyrocket by a whopping 788.64% to hit $1.87 trillion by 2030, according to data obtained by Finbold.
Along with AI, big data, and cybersecurity are also expected to see robust growth in the coming years, UBS wrote in the report.
“We believe these three major foundational technologies are at inflection points and should see faster adoption over the next few years as enterprises and governments increase their focus and investments in these areas.”
– UBS wrote in the report.
Other tech-related sectors, such as metaverse and smart automation, could also do well, according to UBS.
Tech stocks still present opportunities, says UBS
UBS’s AI forecasts come as part of its broader report on tech stocks. In it, the Zurich, Switzerland-based investment bank said it remains “least preferred on the global information technology sector” due to tech stocks’ elevated valuations.
However, despite such concerns, UBS argued there are still investment opportunities in the sector. Tech remains the single-largest component of the MSCI All Country World Index, accounting for 22.5% of the equity index, significantly higher than the financial sector’s weighting of 13.9%.
That said, UBS advises investors to assess their current allocations in tech stocks, before adjusting positions. The bank believes “it could still be prudent to add selectively to exposure” and urges investors to keep their exposure “marginally below benchmark” instead of aggressively reducing their tech holdings.
For investors looking to protect their capital in the short run, UBS recommends rotating away from highly cyclical stocks, such as Asia-based semiconductor companies, and seeking safety in sectors that are not as affected by the economic slowdown, such as software.
