UBS: AI Boom Driving Chinese Stock Market Surge Hasn't Ended, Tech Stock Valuations May Further Increase
UBS's latest report indicates that the rapid development of artificial intelligence (AI) applications such as DeepSeek AI is driving the rise of the Chinese stock market, and this trend is perhaps only halfway through. UBS analysts pointed out that ample liquidity, low-interest rates, and the commercialization of AI technology will further drive market reevaluation of AI-themed stocks, offering investors sustained growth opportunities.
The AI Stock Boom May Last 1-2 Years, Outperforming the Market by 50-100 Points
In their report, UBS strategists James Wang and others mentioned that drawing on the 4G, 5G, and cloud computing eras, tech sector booms typically last 1-2 years. Related AI concept stocks are expected to outperform the market by 50-100 points. This view is based on historical market performance, where themes driven by emerging technology waves often maintain growth momentum over extended periods.
Strong market liquidity and a low-interest environment also support the tech sector's rise, particularly with the widespread application of AI facilitating the reevaluation of software and hardware enterprise valuations.
AI Boosts Tech Stock Valuations, Benefiting CSI 300 and Hang Seng Enterprise Index
Regarding overall market performance, UBS believes artificial intelligence has potentialled an increase in the Chinese stock market's valuations. UBS expects tech stocks to contribute 12-20% growth to the CSI 300 Index and the Hang Seng China Enterprises Index (HSCEI).
Notably, the A-share market typically responds more strongly to theme investments than the Hong Kong stock market, meaning AI-related concept stocks in A-shares might achieve greater gains than their Hong Kong counterparts.
Software Companies May Have Greater Valuation Potential than Hardware Companies
UBS also pointed out that within the AI ecosystem, the valuation potential of software companies might exceed that of hardware companies. This assessment is based on past experiences, demonstrating that the commercialization process of AI applications usually brings higher profit margins and sustainable growth capacity, while hardware companies rely more on equipment sales and are significantly affected by market competition and cycles.
UBS believes that the deepening development of AI in the future will further enhance the profitability of software companies and elevate the overall industry valuation level.
Summary: The AI Boom Continues, Tech Stocks May See a Reevaluation
Overall, UBS believes the market trend driven by the AI wave is not yet over, and there is still considerable room for tech stock growth, especially for software companies. It is expected that tech stocks will continue to contribute significant increases to the CSI 300 and Hang Seng Enterprise Index, with A-share market growth possibly surpassing that of the Hong Kong market. The investment value of AI concept stocks is still being explored, and the market may see further valuation reevaluation opportunities.
