Tech rally has legs amid rising AI adoption, says UBS

UBS remains bullish on tech stocks, projecting continued gains driven by accelerating enterprise AI adoption, which reached 9.2% of U.S. firms in Q2 and is poised to cross the 10% threshold significantly faster than prior technological shifts. This widespread adoption, extending beyond major tech companies and yielding measurable cost savings, underpins UBS's forecast for global AI capital spending to surge 33% to $480 billion in 2026 and 12% earnings growth for the global tech sector in 2025. Despite broader macro risks, structural AI drivers are expected to remain robust, leading UBS to recommend a balanced investment approach across the entire AI value chain.

Analysis

UBS maintains a bullish outlook on the technology sector, attributing the ongoing rally to the accelerating adoption of enterprise artificial intelligence. Citing a U.S. Census Bureau report, analysts highlight that AI usage by American firms grew to 9.2% in the second quarter, a significant increase from 7.4% in the prior quarter and 5.7% in late 2024. This adoption rate is on pace to cross the 10% threshold far more rapidly than previous technological shifts like e-commerce. The trend extends beyond large-cap tech, with some industries reporting adoption rates of 25–30% and achieving measurable cost efficiencies, evidenced by Microsoft automating up to 30% of its coding work and PayPal handling 80% of customer support via AI. Despite acknowledging macro risks such as potential semiconductor tariffs and geopolitical tensions, UBS asserts that the fundamental structural drivers for AI remain intact. This view is supported by forecasts for global AI capital spending to surge 60% this year and rise another 33% to $480 billion by 2026, alongside a projection for 12% earnings growth for the global tech sector in 2025, which is further aided by dollar weakness benefiting U.S. firms with international sales.

Key Decisions for Investors

• Investors should consider a balanced, portfolio-wide exposure to the AI theme, diversifying investments across semiconductor suppliers, software companies, and potentially private-market AI platforms to capture the entire value chain's growth.
• Prioritize companies demonstrating clear, quantifiable benefits from AI implementation, such as significant cost savings or productivity gains, as these firms are best positioned to outperform.
• While the long-term outlook is positive, remain vigilant of macroeconomic headwinds, including potential semiconductor tariffs and geopolitical instability, which could create short-term volatility in tech-focused portfolios.
• Factor in the potential tailwind from continued U.S. dollar weakness, as this could provide an additional boost to the earnings of U.S. technology companies with substantial overseas revenue streams.