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Tech stocks have had a weak two months, but declines have created buying opportunities, UBS's chief investment officer believes, according to Business Insider. In his view, the technology appears undervalued but valuations will rise as investors see how companies' bottom lines benefit from AI.
"Technology stocks remained under pressure in September, as rising yields (n.r. government securities) put pressure on performance. The Nasdaq 100 index is about 8% below its July high," a team led by Mark Haefele wrote in a report. "But, we think the recent weakness provides a good opportunity to increase exposure to artificial intelligence (AI) leaders."
The sector started the year with a rally fueled by the excitement surrounding ChatGPT, but the rally faded as investors grew concerned that the Federal Reserve would keep interest rates high for longer to tame inflation. Between January 1 and the end of July, the Nasdaq Composite rose 38%, but since then, the basket of stocks dedicated to knowledge-intensive companies has fallen 8%. According to the UBS team, the launch of new AI-based products will give tech stocks a boost as investors assess how listed companies can monetize the field.
"The total size of the AI industry will grow from $2.2 billion in 2022 to $170 billion by 2027, and next year will account for 20% of the total revenue growth of the technology sector," estimated the team led by Haefele, according to Business Insider.
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