Buy the dips in software, chips as AI growth story far from over: UBS

Investing.com -- The volatility in tech has cast some doubt on the sector, but UBS believes the dips should be used to buy quality artificial intelligence stocks, particularly within the semiconductor and software segments, as the AI growth story is far from over.

"[W]e think investors should focus on industry fundamentals as they navigate tech sector volatility in the near term, building up sufficient exposure to quality AI stocks via buy-the-dip and structured strategies," analysts at UBS said in a recent note.

The technological advances in AI are still early cycle, the analysts added, with recent developments in the field underlining the "robust demand for the technology and its supply chain."

Major tech firms have underscored demand for AI following significant strides in AI infrastructure. Meta (NASDAQ:META ) recently detailed plans to build its largest AI data center in Louisiana, which is expected to host billions of dollars' worth of AI chips, the analysts said.

Meanwhile, ChatGPT parent-company OpenAI introduced a more advanced large language model designed for research, coding, and writing tasks. Elon Musk's xAI startup, meanwhile, has closed a $6 billion equity fundraising round.

The industry fundamentals continue to remain healthy as the recent wave of earnings reports from tech companies reflect "strong capital expenditure commitments and improving AI monetization," the analysts said, emphasizing the need to focus on quality AI stocks.

"[W]e continue to like the semiconductors and software segments, and are cautious on companies in "traditional" tech areas such as smartphones, PCs, and consumer electronics," they said.

Source: Investing.com