UBS sees its ‘ABCs of tech’ at an inflection level

UBS says AI, massive information and cybersecurity are at an inflection level that ought to see quicker adoptions of the subsequent few years.

Demand for what it calls the “ABCs of tech” is underpinned by “highly effective secular traits round automation, analytics, and safety,” UBS strategist Sundeep Gantori wrote in a notice.

“We forecast the mixed revenues of the three segments will develop from USD 386b in 2020 to USD 625bn in 2025, implying a median clip of 10% yearly, larger than the mid- to high-single digits we forecast for the broader tech sector (NYSEARCA:XLK),” Gantori mentioned.

“We predict buyers could be finest rewarded by investing in a diversified group of incumbents and disruptors uncovered to the three key segments,” he mentioned. “We’re lowering disruptors’ weighting to 10% (and rising incumbents’ weighting to 90%) attributable to near-term valuation uncertainty amid a rising price backdrop.”

Disruptor shares on the main target checklist:

1. CrowdStrike (CRWD) – “Robust secular tailwinds from rising cloud computing market will assist to bolster its topline development.”
2. Fortinet (FTNT) – “Being a pacesetter within the cybersecurity house, we imagine it’s properly positioned to seize secular development traits.”
3. Palo Alto Networks (PANW) – “Long run, we count on the corporate to realize share within the extremely fragmented cyber safety business attributable to its differentiated platform and focused acquisitions, in addition to its rising concentrate on cloud-based safety options.”
4. ServiceNow (NOW) – “ServiceNow is properly positioned to seize the expansion in demand for digital transformation companies, due to its robust aggressive product ecosystem.”
5. Splunk (SPLK) – “The corporate ought to proceed to see robust income and billing development pushed by continued adoption by new customers in addition to robust renewal charges and upsell exercise into its put in base.”
6. Workday (WDAY) – “We imagine it’s well-placed to leverage on cross-sell alternatives in planning, procurement, and analytics software program.”
7. Zscaler (ZS) – “Being a pacesetter within the cybersecurity house, we imagine it’s properly positioned to seize secular development traits.”

Incumbent shares on the main target checklist:

1. AMD (AMD) – “As a key incumbent within the ABCs of tech, AMD is properly positioned to experience the secular development in information facilities, AI, consoles, and accelerators, given it main positions in each the GPU and microprocessor segments.”
2. Alphabet (GOOG) – USB favors “Alphabet for its best-in-class AI-driven search and promoting.”
3. Amadeus IT Group (OTCPK:AMADY) – “We imagine its fixed product and companies innovation revolving across the integration of machine studying fashions will assist to reinforce its worth proposition.”
4. Utilized Supplies (AMAT) – UBS favors “AMAT attributable to its management in semiconductor gear, an business that stands to learn from robust chip demand pushed by massive information and AI.”
5. ASML (ASML) – “We predict ASML deserves a premium valuation (P/E) given the corporate is properly positioned to learn from rising silicon content material in good units and its migration to superior know-how excessive ultraviolet lithography merchandise.”
6. Broadcom (AVGO) – “Broadcom is attractively valued (P/E foundation) given its regular revenues development and robust free money circulate technology.”
7. Capgemini (OTCPK:CGEMY) – UBS likes “Capgemini for its aggressive AI and analytics companies, permitting enterprise prospects to implement ready-to-market AI and large information options.”
8. Verify Level Software program (CHKP) – UBS favors “Verify Level for its constant share International fairness focus checklist, buyback technique, comparatively engaging free money circulate yield, and renewed efforts to invigorate development by way of product improvements.”
9. Cisco Methods (CSCO) – “We imagine its fixed product innovation within the discipline of cyber safety and AI will assist to gas long-term development.”
10. Cognizant Know-how (CTSH) – A “main IT service supplier with robust functionality in scaling AI initiatives for enterprise shoppers.”
11. Dell (DELL) – “We imagine Dell will stay as a dominant participant because the demand for large information and AI integration amongst enterprises is prone to enhance over the subsequent decade.”
12. Gartner (IT) – “Gartner is properly positioned to learn with its strong entry to information, know-how spending and consulting companies.”
13. HP (HPQ) – “HP is well-positioned within the still-nascent 3D printing market.”
14. Intel (INTC) – “We count on the corporate to make important enhancements in its manufacturing course of and restrict share losses to manageable ranges.”
15. Lam Analysis (LRCX) – UBS likes “LAM Analysis for its management within the semiconductor house, with reminiscence capex spending as a powerful long-term catalyst.”
16. Marvell Know-how (MRVL) – “We count on the corporate to surpass its longer income mannequin given a sturdy order e-book throughout all end-markets.”
17. Micron Know-how (MU) – “Micron’s profitability ought to enhance amid agency DRAM pricing and continued price enhancements.”
18. Microsoft (MSFT) – “Its valuation remains to be engaging in comparison with its large-cap friends on a free-cash-flow foundation.”
19. MSCI (MSCI) – “MSCI is poised to learn probably the most from robust development in its massive information options.”
20. Nvidia (NVDA) – UBS likes Nvidia “given its main place within the GPU market, an necessary semiconductor used for AI.”
21. Oracle (ORCL) – “We imagine estimates have doubtless troughed and count on stabilizing income development in its cloud and large information providing.”
22. Taiwan Semiconductor (TSM) – UBS favors “TSMC for its defensive enterprise mannequin and publicity to a number of long-term development segments like synthetic intelligence and the Web of Issues.”
23. Texas Devices (TXN) – TXN ought to “profit from the rising semiconductor content material in vehicle business, with AI and large information as further catalysts.”
24. Thomson Reuters (TRI) – TRI anticipated to “proceed gaining market share, supported by its differentiated product choices to information staff.”
25. VMware (VMW) – “VMWare will profit from the rising pattern of enterprises’ migration to cloud.”

SA contributor JR Analysis is advising shopping for tech hand over fist.