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AI disruption and opportunity
We see the genAI technology transition as a platform shift, owing to the underlying performance of the technology and its universal applicability.
GenAI is expected to expand beyond the technology sector and have wide-reaching implications. The underlying technology of genAI is improving at a rapid pace and being embraced by new industries.
Culture will be a key determinant as to which firms capture the value from genAI rather than be disrupted by it over the long term.
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Can the AI rally resume?
Key message
Tech stocks has come under renewed pressure as US expands its chip export curbs while tariff uncertainty remains elevated. But while volatility is likely to remain in the near term, we think solid fundamentals of the AI growth story will drive the sector鈥檚 long-term outperformance. Structured strategies including capital preservation strategies should be considered in building up long-term exposure, in our view.
While we see further risks over the near to intermediate term, we still view the US technology sector and the AI TRIO (Transformational Innovation Opportunities) as Attractive.
New this week
Taiwan Semiconductor Manufacturing Co.(TSMC), the world鈥檚 largest contract chip manufacturer, offered some reassurance of the underlying AI demand by maintaining its revenue growth outlook and capital spending projection for 2025. It also kept its forecast that AI-related sales will double this year, and guided for a better-than-expected 2Q net revenue.
Investment view
While uncertainty remains elevated, quality tech stocks should see a strong price-to-earnings multiple rerating once fundamentals are back in focus. Investors can consider structured strategies to build long-term exposure.
Did you know?
- During the first trade war in 2018, heightened tech volatility was followed by a 35% rebound in the next 12 months as investors focused on quality tech companies鈥 solid fundamentals and strong free cash flow generation.
- Potentially lower training and inference costs could accelerate AI adoption in a growing addressable market, boosting AI monetization in the medium to longer term.
- The artificial intelligence market potential is large鈥攚e estimate that AI value creation could amount to USD 1.16 trillion by 2027.
10 predictions about AI
1. AI will be the most profound innovation and one of the largest investment opportunities in human history
2.聽The ratio of monetization potential of the AI application layer to the costs of the enabling and intelligence layers will become a key metric for investment returns
3.聽AI will kick off a data center capex cycle that will dwarf general purpose data center capex in the next years
4.聽The AI silicon moment: AI chips will capture a large part of the AI value creation
5.聽The AI enablers will be the first adopters of AI, driving both revenue and margin upside
6.聽Monolithic players will emerge along the AI value chain and over time, the AI market will be dominated by an oligopoly of vertically integrated 鈥淎I foundries鈥
7.聽Software will become ubiquitous
8.聽Data assets will emerge as the competitive differentiators for AI adopters
9.聽Despite the increasing number of new open-source models, proprietary models will remain the top performers
10.聽The application and intelligence layers will merge with artificial general intelligence (AGI)
Artificial intelligence: Sizing and seizing the investment opportunity
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