UBS stated that the market underestimates the AI cycle, and a return inflection point may occur in 2027

According to Bloomberg, Gerry Fowler, Chief European Equity Strategist and Head of Derivatives at UBS, stated that the market has underestimated the duration of the AI cycle, and AI trading remains robust. He pointed out that the valuation multiples of some hyperscale cloud vendors have fallen below 20 times, while revenue continues to grow by 10% to 20% annually, reflecting a rather pessimistic market expectation. Therefore, many investors are still willing to re-enter AI-related assets.

Fowler believes that massive AI spending may be nearing a stage where it starts to yield returns, with a potential turning point in 2027: data center deliveries are expected to release backlogged orders, driving revenue to gradually catch up with capital expenditures. He mentioned that cash has not disappeared from the market but has shifted to suppliers like memory chip manufacturers, who are beginning to return cash to investors. The market pricing for memory chip companies also reflects what he believes is an overly short AI cycle.

Regarding the next phase of beneficiaries, Fowler is more focused on global and European industrial companies that help build new factories. He noted that many infrastructure suppliers, such as those providing cables and electrical equipment, have orders booked through 2027 or even 2028, leaving limited room for upward revisions in profit forecasts. ASML benefits by supplying equipment to memory manufacturers like Samsung Electronics and SK Hynix, rather than directly supplying data centers; he stated that ASML and some European industrial companies are receiving upward revisions in expectations.