LIVE MARKETS-AI's next European winners, according to UBS

By Reuters News

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AI'S NEXT EUROPEAN WINNERS, ACCORDING TO UBS

The initial phase of the AI investment boom may have been relatively easy to spot.

As the hyperscalers raced to build data centres, investors piled into the companies supplying the obvious infrastructure, namely power equipment, cabling and cooling systems.

UBS believes that the second wave may be underway. Many of those first-phase winners are running into capacity constraints of their own, forcing them to spend heavily to expand production and create new beneficiaries further down the supply chain.

UBS divides the AI infrastructure ecosystem into three layers. Tier 1 consists of companies selling directly into data-centre construction. Tier 2 includes suppliers providing equipment and materials needed by those Tier 1 firms as they expand capacity. Tier 3 comprises specialist component makers supplying those equipment manufacturers.

"This isn't a story of good tier versus bad tier," UBS says, as they note that every tier screen is still a 'buy' on aggregate.

"It's a story of nuanced rotation in where the earnings revision leadership is moving, and right now that is further down the capex chain."

UBS's preferred expressions of the theme include Siemens SIEGn.DE, ASML ASML.AS, Schneider Electric SCHN.PA, Anglo American AAL.L, Air Liquide AIRP.PA, VAT Group VACN.S, Comet Holding COTNE.S, Inficon IFCN.S and SPIE SPIE.PA, which it says are positioned to benefit from the industrial capacity expansion cycle.

(Samuel Indyk)

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