LIVE MARKETS-AI volatility is the new normal, says UBS

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AI VOLATILITY IS THE NEW NORMAL, SAYS UBS

The sharp tech selloff last week may mark a shift in how investors judge the artificial intelligence trade, according to Mark Haefele, CIO at UBS Global Wealth Management.

While strong earnings continue to show robust demand for AI infrastructure, investors are becoming more focused on whether huge spending plans can generate adequate returns.

Recent results from Alphabet GOOGL.O and Meta META.O highlighted concerns over overinvestment, financing and the risk that AI products could undermine existing revenue streams.

However, UBS notes cloud growth remains strong and points to accelerating revenues at Google Cloud, Microsoft Azure and Oracle as evidence that demand for computing capacity is still expanding.

UBS believes investors should not abandon the theme despite recent turbulence, arguing that AI should remain a positive driver of global equity returns next year.

But as the focus turns more closely on monetisation and returns, the bank advises greater selectivity and warns that market swings are likely to increase.

"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".

(Danilo Masoni)

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