UBS Strategist Sees 2027 as Potential Turning Point for AI Returns

UBS Chief European Equity Strategist and Head of Derivatives Gerry Fowler sees 2027 as a possible turning point for AI spending, as data-center deliveries could unlock backlogs and help revenue catch up with capital spending.

Fowler said some hyperscalers trade at valuation multiples below 20 times while growing revenue 10% to 20% a year, a combination he views as evidence of pessimistic market expectations. He said investors remain willing to buy AI-related assets.

Cash has moved toward memory-chip makers, Fowler said, and those companies are beginning to return cash to investors. He said market valuations of memory companies imply a shorter AI cycle than he expects.

Fowler sees global and European industrial companies that help build new factories as potential beneficiaries in the next phase. Many cable and power-equipment suppliers have orders scheduled through 2027 and, in some cases, 2028, leaving limited room for further earnings estimate increases, he said.

ASML benefits from expansion by Samsung Electronics and SK Hynix as they expand memory-chip factories, rather than through direct data-center supply, Fowler said. He said earnings expectations are rising for ASML and some European industrial companies.