AI volatility is the new normal, says UBS
QQQ•UBS says investors are focusing more on whether large AI spending plans will generate adequate returns, and warns that greater volatility is likely as attention shifts to monetisation. The bank says strong cloud growth supports continued demand for computing capacity and that AI should remain a positive driver of global equity returns next year.
1. Investors scrutinize AI spending
A sharp tech selloff last week may signal a shift in how investors judge the artificial intelligence trade, UBS Global Wealth Management CIO Mark Haefele said. Strong earnings continue to show robust demand for AI infrastructure, but investors are paying more attention to whether large spending plans can deliver adequate returns.
2. Cloud demand remains strong
UBS pointed to accelerating revenues at Google Cloud, Microsoft Azure and Oracle as evidence that demand for computing capacity is still expanding. The bank said investors should not abandon the theme, but advised greater selectivity as attention turns to monetisation and returns. “The bar for performance is rising and higher volatility in the AI trade is likely to be the new normal in this stage of the cycle”.
