Bloomberg reported that Gerry Fowler, UBS’s chief European equity strategist and head of derivatives, said the market is underestimating how long the AI cycle can last and that the AI trade remains resilient.
Fowler said some hyperscale cloud companies are now trading at valuation multiples below 20x even as revenue is still growing 10% to 20% a year. In his view, that points to notably pessimistic expectations in the market and helps explain why some investors are still willing to buy back into AI-related assets.
A possible turning point in 2027
Fowler said the wave of heavy AI spending may be getting close to the stage where returns begin to emerge. He said 2027 could become a potential inflection point, with data center deliveries helping release backlogged orders and allowing revenue to gradually catch up with capital spending.
He also said cash has not disappeared from the market. Instead, it has moved to suppliers such as memory chip manufacturers, which are starting to return cash to investors. Pricing in memory chip stocks, he said, also reflects what he sees as an AI cycle being valued too briefly.
Focus shifts to industrial and equipment suppliers
For the next group of beneficiaries, Fowler said he is more focused on global and European industrial companies helping build new factories. He added that many infrastructure suppliers, including cable and power equipment companies, already have order books stretching into 2027 and even 2028, leaving limited room for further earnings estimate upgrades.
ASML, he said, is benefiting by supplying equipment to memory manufacturers that are expanding capacity, including Samsung Electronics and SK Hynix, rather than by supplying data centers directly. He added that expectations for ASML and some European industrial companies are being revised upward.
