The AI investment cycle remains intact with demand expected to justify the current surge in infrastructure spending into 2026 and beyond, analysts at UBS believe.
The analysts believe the next phase of AI trade will be defined by the ability of demand from model developers, consumers and enterprises to keep pace with aggressive capital expenditures.
“We think the easing of AI hardware supply chain constraints throughout 2025 will shift investor debate to focus more on whether demand for AI compute and software applications in the coming years will be sufficient to justify this current ramp in infrastructure build-out,” the analysts wrote.
They highlighted three pillars of AI-driven demand: training by large model providers such as OpenAI, Google, Anthropic, Meta, and xAI; inference for consumer-facing tools like ChatGPT and AI Overviews; and the design and deployment of enterprise AI applications.
The analysts used a combination of qualitative assessments, compute-based modeling, department-wide analyst input, and Evidence Lab data on AI mentions in earnings calls to analyze the strength and duration of each pillar and determined that the demand story remains solid.
“We conclude that demand to train new models and consumer inference workload growth on the back of ChatGPT’s popularity and the continued rollout of various products from Meta, Google, and Amazon should sustain GPU demand for years to come,” they wrote.
Enterprise adoption is the most uncertain factor, they noted.
“We see enterprise AI spend as the primary source of risk as organizations are moving slowly, the ROI is less clear, and AI technology needs to be architected to automate specific enterprise workflows and tasks,” they wrote.
A potential gap could emerge if consumer and model training demand slows before enterprise investment catches up, resulting in a “temporary digestion phase.” However, they attach a low probability to this scenario.
Top AI picks
UBS continues to favor Nvidia Corp (NASDAQ:NVDA, ETR:NVD) and Broadcom Inc (NASDAQ:AVGO, ETR:1YD) as the most direct beneficiaries of sustained compute and networking needs.
Analysts also highlighted Micron Technology Inc (NASDAQ:MU) as a key player benefiting from elevated memory demand, and Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM) as a global leader in chip manufacturing leveraged to AI trends.
Within software, UBS prefers infrastructure- and data-oriented companies like Oracle Corp (NYSE:ORCL, ETR:ORC) and Snowflake Inc (NYSE:SNOW) over traditional SaaS names, though it sees ServiceNow Inc (NYSE:NOW, ETR:4S0) as a standout among large-cap SaaS players in terms of AI monetization.
Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) is expected to benefit from both consumer-facing applications such as Meta AI and its growing suite of AI tools for advertisers under the Advantage+ brand.
On the hardware side, UBS points to Arista Networks Inc (NYSE:ANET) and Ciena Corporation (NYSE:CIEN) as well-positioned beneficiaries, alongside Taiwanese manufacturers Quanta Services Inc (NYSE:PWR) and Wistron.