📢 Flash
UBS Says Market Underestimates AI Cycle, Potential Return Inflection Point in 2027
Bloomberg cited Gerry Fowler, UBS’s Chief European Equity Strategist and Head of Derivatives, noting that the actual duration of the AI cycle has been significantly underestimated by markets—and AI-related trades remain robust. He emphasized that valuations for some hyperscale cloud providers have fallen below 20x, even as their revenues continue growing 10%–20% annually—highlighting unusually cautious market sentiment. As a result, many investors are actively rebuying AI-themed assets.
Fowler further analyzed that large-scale AI capital expenditures may now be approaching the inflection point where returns begin materializing, with 2027 potentially serving as a pivotal year: accelerating data center deliveries could trigger a concentrated release of long-pending orders, pushing revenue growth to catch up with—and eventually outpace—capex expansion.
He also observed that market liquidity hasn’t contracted; rather, it has shifted upstream—from end-user applications to the supply chain, particularly memory chip manufacturers. These firms have already begun returning cash to shareholders. Concurrently, capital markets’ valuation frameworks for memory chip companies are undergoing a fundamental shift.
Fowler further analyzed that large-scale AI capital expenditures may now be approaching the inflection point where returns begin materializing, with 2027 potentially serving as a pivotal year: accelerating data center deliveries could trigger a concentrated release of long-pending orders, pushing revenue growth to catch up with—and eventually outpace—capex expansion.
He also observed that market liquidity hasn’t contracted; rather, it has shifted upstream—from end-user applications to the supply chain, particularly memory chip manufacturers. These firms have already begun returning cash to shareholders. Concurrently, capital markets’ valuation frameworks for memory chip companies are undergoing a fundamental shift.
