UBS forecasts mid-teen returns for global AI stocks by 2025, driven by robust investment and growing monetisation trends, despite potential market fluctuations from tariffs and export controls. The prediction follows China’s launch of DeepSeek AI, which briefly impacted Big Tech stocks, including Nvidia.
Lenovo’s revenue increased by 20%, attributed to demand for AI computing, indicating the economic impact of AI. UBS anticipates global AI spending, excluding China, will reach $500 billion by 2026, with AI-related revenues potentially matching this figure for a $1 trillion demand opportunity.
By 2026, UBS projects global AI operating profits at $350 billion, based on a margin estimate of 35%. This is lower than the margins anticipated for cloud platforms and AI semiconductor firms.
Applying a 30x multiple to the estimated operating profits for 2026 values the AI sector at $10.5 trillion by the end of 2025, up from a current market cap of $9 trillion. While market conditions may fluctuate due to trade policy uncertainty, UBS believes that AI’s long-term fundamentals are strong.
The expectation of mid-teen returns from AI stocks over the next few years reflects the rapid expansion of artificial intelligence across industries. The rapid jump in Lenovo’s revenue offers clear evidence that AI-related investments are translating into real financial outcomes. A 20% rise in sales, propelled by demand for AI computing, shows enterprises are allocating greater resources toward AI-driven infrastructure. We see this as a sign that businesses are preparing for a future where AI is deeply integrated into operations.
The projected $500 billion in AI spending, excluding China, highlights how quickly companies outside that market are directing funds into artificial intelligence. At the same time, the chance for AI-linked revenue to reach the same level implies a robust, self-sustaining economic loop. The result is an addressable opportunity of $1 trillion, reinforcing the idea that capital continues to line up behind AI research, development, and deployment. Firms positioned in leading segments, particularly AI semiconductors and cloud-based AI services, may benefit from this growing commitment.
Operating profits in the AI sector, estimated at $350 billion by 2026, point to certain financial realities. The expectation of a 35% margin is compelling, although it sits below the levels projected for semiconductor providers and cloud platforms. This gap suggests that competition and cost structures of AI services could weigh on profitability compared to the hardware and cloud computing markets. However, overall profit growth remains strong enough to sustain market expansion, with a possible market capitalisation of $10.5 trillion by the end of 2025.
While AI’s long-term potential remains firmly intact, possible disruptions from trade regulations and policy shifts cannot be ignored. Market reactions to China’s launch of DeepSeek AI, which briefly affected Nvidia and other large technology firms, serve as a reminder of this. Structural AI growth trends remain in place, but short-term movement may introduce volatility. Tighter export controls, tariffs, or geopolitical developments could create temporary setbacks. Yet, with fundamentals in place, these fluctuations may do little to change broader AI-sector momentum.
