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Artificial intelligence-related stocks have been on the rise this year, and UBS is becoming even more bullish on some names. Nvidia has been the bellwether for names in the space, and the chip darling has surged about 186% this year. In comparison, the S & P 500 has risen more than 22% in 2024.
"We believe we are still in the early stages of the AI growth story," UBS equity strategist Sundeep Gantori wrote in a Monday note to clients, noting the launch of ChatGPT in 2022 as an inflection point for AI adoption. "While the theme's initial gains thus far have been led by semiconductors due to their dominant presence in the enabling layer, we see appealing opportunities ahead, including beneficiaries in other sectors and regions as the AI investment opportunity broadens." Gantori noted most analysts agree that annual revenues related to the AI industry could pass the trillion-dollar threshold within the next decade.
"Overall, we would use any near-term volatility in AI-related companies — due, for example, to weak seasonality and geopolitical escalations — to build strategic and long-term AI exposure, given the solid outlook for AI over the next 12-18 months amid robust [capital expenditure] growth and improving monetization," he continued. In light of this, UBS refreshed its new global AI portfolio, incorporating an updated stance on Meta Platforms . The firm is especially favorable toward AI infrastructure stocks that have strong pricing power and competitive positioning, as well as platform and application beneficiaries.
Here are some names on the list. Meta, which is set to report its third-quarter results after the bell on Wednesday, has surged nearly 66% in 2024, and UBS thinks there could be further upside due to the company's short-form video efforts. On top of that, Meta's investment in the metaverse through its Reality Labs unit, which is focused on producing virtual reality and augmented technologies, is the "right longer-term strategy," according to the firm.
"The company should benefit from healthy user engagement, improving monetization of Reels, and longer-term monetization of Instagram and WhatsApp offer longer-term opportunities," UBS wrote. Apple and Intel are also slated to post their quarterly results this week, with both names reporting after the bell on Thursday. Notably, Apple has risen more than 21% this year.
On Monday, the company officially released its AI platform known as Apple Intelligence in an iOS update for the iPhone 16 and iPhone 15 Pro, as well as in software updates for the iPad and Mac. Shares closed nearly 1% higher following the announcement. Moving forward, UBS sees a favorable risk/reward profile for the name, citing steady iPhone growth and strong growth in its services, among others, as catalysts.
Meanwhile, Intel, which has fallen more than 54% this year, could see gains ahead, as the firm thinks the PC industry more broadly is at a trough. Seeing rising demand for AI compute, Intel should face opportunities to catch up to its peers, the firm's analysts said. AAPL INTC YTD mountain AAPL vs.
INTC, year-to-date Streaming giant Netflix could also be a beneficiary of the rise in AI demand. The stock has already soared about 56% in 2024. UBS thinks this early adopter of AI applications is still "well placed" to benefit from use cases that are relevant to the industry.
"We believe the markets' concerns about Netflix are overdone," the firm said. "While we agree that rising competition will result in some subscriber churn, we expect Netflix to continue to report strong growth globally.".
