LIVE MARKETS-Don't worry about AI demand

By Reuters News

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DON'T WORRY ABOUT AI DEMAND

AI jitters are bubbling away, and with earnings season being imminent (yes, it's already that time of the quarter again), markets are on high alert for any and all hints about the outlook for demand, spending, and anything else AI-related as they worry about the trade's future.

But at least some of the worries might be overdone. According to Mark Haefele, chief investment officer at UBS Global Wealth Management, recent industry data is, in fact, pointing to robust demand.

For one, he highlights early adoption figures of consumer AI agents, for example Meta's Muse AI assistant which launched about a month ago. The early figures, Haefele said, "offer an encouraging indication of how rising adoption of consumer AI agents could further add to AI demand."

Recent revenue numbers from the semiconductor sector also "suggest sustained compute demand," Haefele added. TSMC last week reported a huge jump in third-quarter revenue, while Samsung Electronics projected a massive leap in third-quarter operating profit.

"With upcoming third-quarter earnings likely to offer further evidence of robust demand for AI compute and infrastructure, we expect fundamentals to drive the AI trade in the coming weeks," Haefele said.

And finally, he noted that hyperscaler monetisation should keep accelerating, adding that average cloud revenue growth is expected to have increased in the September quarter from the previous one.

"In fact, consumer AI agents could be the next growth driver that expands monetization opportunities, from subscriptions and advertising to transactions," Haefele said.

"Broader adoption would also increase cloud utilization, providing a clearer link between hyperscalers’ infrastructure spending and revenue growth."

(Sophie Kiderlin)

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