The artificial intelligence spending cycle is still in its early stages, according to UBS analysts, who see further opportunities for investors across technology, media and telecommunications as companies move from experimenting with AI to deploying it at scale.
The UBS team has identified 14 “highest-conviction calls” across the TMT sectors, with many of the companies positioned to benefit from continued spending on AI infrastructure, cloud services, chips, networking equipment and enterprise software, MarketWatch reported.
The analysts said the next phase of AI growth is likely to be driven by enterprise adoption, noting that only a small share of companies surveyed have deployed agentic AI at scale.
“The next leg should come from enterprise adoption,” the analysts said in a Thursday note to clients.
Of the companies UBS surveyed on agentic AI deployment, only 8% had implemented the technology at scale.
Amazon top pick among large-cap internet companies
UBS expects businesses to increase spending on AI infrastructure even as some companies consolidate technology vendors and reduce broader IT budgets.
The analysts also noted that open-source AI models are gaining traction because of their perceived cost advantages.
However, enterprises often deploy those models through major cloud platforms, including Microsoft Azure and Amazon Web Services.
That dynamic could continue to support spending by the largest cloud providers as companies seek computing capacity to run increasingly demanding AI workloads.
Amazon is UBS’s top pick among large-cap internet companies.
The analysts have estimates for AWS revenue above the broader consensus and believe Wall Street “should catch up” as Amazon’s largest customers prepare to deploy its Trainium 2 and Trainium 3 chips from later this year into 2027.
UBS has a $318 price target on Amazon shares, representing about 25% upside from current levels.
Texas Instruments gets boost from chip cycle
Among semiconductor and chip-equipment companies, UBS selected analog chipmaker Texas Instruments as its top pick.
The analysts said the analog semiconductor cycle, which is driven largely by automotive and industrial demand, is beginning to recover.
Texas Instruments has also been gaining market share, providing another potential source of growth.
UBS expects the data-center boom to create additional opportunities for the company as demand for semiconductor components expands alongside AI infrastructure investment.
“Even if growth in data center decelerates slightly next year,” Texas Instruments’ total revenue should still grow by about 20%, according to the analysts.
UBS sees Texas Instruments shares rising 43% to a $380 price target, citing improving industry momentum, market-share gains and the potential for stronger free cash flow.
Celestica, TD Synnex benefit from data centers
In telecom and networking equipment, UBS highlighted Celestica as a major beneficiary of the next phase of AI infrastructure investment.
The analysts expect OpenAI’s planned rollout of its first custom chip next year to support revenue growth of at least 70% for Celestica.
The company is already a major provider of Ethernet switching technology to hyperscalers including Google and Meta.
UBS has a $430 price target for Celestica, implying 29% upside.
Data-center investment is also expected to benefit IT distributor TD Synnex.
Its Hyve Solutions business manufactures custom hardware, including servers and networking equipment, for data-center operators and cloud-service providers.
UBS expects spending on data-center infrastructure to increase by at least 30% annually over the next three years.
The analysts have a $352 price target for TD Synnex, implying 32% upside.
Palantir seen at intersection of AI and data
Palantir Technologies is another major UBS conviction call, with the analysts describing the company as “at the nexus of the two most powerful spending trends in software – AI and data.”
UBS expects Palantir’s revenue to increase 88%, while its margin is forecast to reach the low-60% range.
The analysts said Palantir has “a very strong demand backdrop for its AI and automation software” and faces limited competition from other AI and software providers.
UBS described the shares as “very attractive” and set a $250 price target, compared with a market price of $177.64.
AT&T, EchoStar, Pinterest among other picks
Beyond Amazon, Texas Instruments, Celestica, TD Synnex and Palantir, UBS’s other top picks include SS&C Technologies, AT&T, EchoStar, Pinterest, Spotify Technology, Mastercard, Global-e Online, Procore Technologies and JFrog.
The breadth of the list reflects UBS’s view that the AI investment cycle is extending beyond chipmakers and model developers.
As enterprises begin deploying AI more widely, the analysts expect spending to spread across cloud infrastructure, networking, data management, software and other technology services.
That could create a second phase of the AI investment cycle in which enterprise adoption becomes increasingly important alongside the massive infrastructure buildout that has driven the sector so far.
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