UBS Highlights Asian Tech Giants as Next Major AI Investment Opportunity
For years, the “Magnificent 7” have dominated investment portfolios worldwide, delivering substantial returns through strategic positions in American Big Tech companies. However, UBS now shifts the spotlight to Asia, proclaiming that it’s the Asian tech giants that offer the next significant upside potential. This comes at a time when global investors are increasingly exploring opportunities beyond the traditional U.S. tech landscape.
UBS recommends diversifying investments with a focus on what it calls the ‘Super 8’ – a collection of dominant companies in their respective sectors, which UBS analysts believe possess substantial growth potential. According to UBS, “We believe it’s an opportune moment to build positions for the AI rally in Asia.”
Since the inception of the ‘Asia Super 8′ portfolio in February, it has achieved an 8.3% increase, outperforming the MSCI Asia-Pacific index, which rose by 6.7%. The UBS strategists underline the solid earnings growth and attractive valuations of these high-quality tech giants as a key reason for their recommendation. “With robust earnings growth and favorable valuations compared to other global tech firms, we believe these heavyweights are a viable alternative to the U.S.’s Magnificent 7,” they assert.
The ‘Super 8’ comprises a blend of tech behemoths from across Asia, including Samsung, Tencent, Tokyo Electron, Lenovo, TSMC, Hon Hai (Foxconn), ASMPT, and Infosys, each carefully selected for their dominant market positions and growth potential. UBS’s data, referenced by CNBC and gathered from the market consensus by FactSet, reveals interesting insights into these companies’ potential upsides.
Leading the pack is South Korea’s Samsung, with an impressive upside potential of 25.6% relative to its latest closing price. This is followed by China’s Tencent at 19.5%. Other significant players include Japan’s Tokyo Electron, a semiconductor giant, with a potential rise of 17.4%, and China’s Lenovo, pegged at 16.8%.
Taiwan’s representation in the Super 8 includes TSMC and Hon Hai (Foxconn). Foxconn, the world’s largest electronics manufacturer and principal assembler for Apple products, is expected to see a 40% increase in its AI server division production. Notably, its stock has already rocketed by over 100% since the start of the year. The list is rounded out by Singapore’s ASMPT, listed in Hong Kong, and India’s Infosys, a standout as the sole company with a current price above market consensus.
UBS analysts emphasize that these companies are strategically positioned to capitalize on the burgeoning investments in artificial intelligence. Despite acknowledging certain risks, such as geopolitical regulations in the AI industry, overinvestment in products and services, and client concentration, UBS maintains a positive outlook. “Much of the investment pull is driven by the Magnificent 7,” UBS notes, yet they assert that the appealing valuations and bright growth prospects in both sales and profits ensure that “short-term opportunities outweigh the risks.”
Amid the evolving technological landscape and heightened interest in artificial intelligence, UBS’s pivot towards Asia’s tech giants represents a significant call for investors seeking to diversify and tap into burgeoning markets beyond the Western hemisphere. The emphasis on the Asia Super 8 underscores UBS’s conviction in the region’s potential to match and possibly eclipse the performance of America’s tech titans in the near term.
