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

UBS says AI, giant information and cybersecurity are at an inflection level that are meant to see sooner adoptions of the following couple of years.

Call for for what it calls the “ABCs of tech” is underpinned by way of “tough secular tendencies round automation, analytics, and safety,” UBS strategist Sundeep Gantori wrote in a observe.

“We forecast the blended revenues of the 3 segments will develop from USD 386b in 2020 to USD 625bn in 2025, implying a median clip of 10% once a year, upper than the mid- to high-single digits we forecast for the wider tech sector (NYSEARCA:XLK),” Gantori stated.

“We predict buyers can be splendid rewarded by way of making an investment in a various crew of incumbents and disruptors uncovered to the 3 key segments,” he stated. “We’re decreasing disruptors’ weighting to ten% (and extending incumbents’ weighting to 90%) because of near-term valuation uncertainty amid a emerging fee backdrop.”

Disruptor shares on the point of interest checklist:

1. CrowdStrike (CRWD) – “Sturdy secular tailwinds from rising cloud computing marketplace will assist to strengthen its topline expansion.”
2. Fortinet (FTNT) – “Being a pacesetter within the cybersecurity area, we consider it’s properly placed to seize secular expansion tendencies.”
3. Palo Alto Networks (PANW) – “Long run, we think the corporate to realize percentage within the extremely fragmented cyber safety business because of its differentiated platform and focused acquisitions, in addition to its expanding focal point on cloud-based safety answers.”
4. ServiceNow (NOW) – “ServiceNow is easily placed to seize the expansion in call for for virtual transformation products and services, due to its robust aggressive product ecosystem.”
5. Splunk (SPLK) – “The corporate must proceed to look robust earnings and billing expansion pushed by way of persisted adoption by way of new customers in addition to robust renewal charges and upsell job into its put in base.”
6. Workday (WDAY) – “We consider it’s well-placed to leverage on cross-sell alternatives in making plans, procurement, and analytics instrument.”
7. Zscaler (ZS) – “Being a pacesetter within the cybersecurity area, we consider it’s properly placed to seize secular expansion tendencies.”

Incumbent shares on the point of interest checklist:

1. AMD (AMD) – “As a key incumbent within the ABCs of tech, AMD is easily placed to trip the secular expansion 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 seek and promoting.”
3. Amadeus IT Crew (OTCPK:AMADY) – “We consider its consistent product and products and services innovation revolving across the integration of gadget finding out fashions will assist to fortify its worth proposition.”
4. Implemented Fabrics (AMAT) – UBS favors “AMAT because of its management in semiconductor apparatus, an business that stands to have the benefit of robust chip call for pushed by way of giant information and AI.”
5. ASML (ASML) – “We predict ASML merits a top rate valuation (P/E) given the corporate is easily placed to have the benefit of emerging silicon content material in sensible units and its migration to complex era excessive ultraviolet lithography merchandise.”
6. Broadcom (AVGO) – “Broadcom is attractively valued (P/E foundation) given its stable revenues expansion and robust unfastened coins move technology.”
7. Capgemini (OTCPK:CGEMY) – UBS likes “Capgemini for its aggressive AI and analytics products and services, permitting endeavor shoppers to put in force ready-to-market AI and large information answers.”
8. Take a look at Level Tool (CHKP) – UBS favors “Take a look at Level for its constant percentage World fairness focal point checklist, buyback technique, moderately horny unfastened coins move yield, and renewed efforts to invigorate expansion thru product inventions.”
9. Cisco Methods (CSCO) – “We consider its consistent product innovation within the box of cyber safety and AI will assist to gasoline long-term expansion.”
10. Cognizant Generation (CTSH) – A “main IT provider supplier with robust capacity in scaling AI tasks for endeavor purchasers.”
11. Dell (DELL) – “We consider Dell will stay as a dominant participant because the call for for giant information and AI integration amongst enterprises is more likely to building up over the following decade.”
12. Gartner (IT) – “Gartner is easily placed to learn with its powerful get right of entry to to information, era spending and consulting products and services.”
13. HP (HPQ) – “HP is well-positioned within the still-nascent three-D printing marketplace.”
14. Intel (INTC) – “We predict the corporate to make important enhancements in its production procedure and prohibit percentage losses to manageable ranges.”
15. Lam Analysis (LRCX) – UBS likes “LAM Analysis for its management within the semiconductor area, with reminiscence capex spending as a robust long-term catalyst.”
16. Marvell Generation (MRVL) – “We predict the corporate to surpass its longer earnings type given a powerful order ebook throughout all end-markets.”
17. Micron Generation (MU) – “Micron’s profitability must strengthen amid company DRAM pricing and persisted value enhancements.”
18. Microsoft (MSFT) – “Its valuation remains to be horny in comparison to its large-cap friends on a free-cash-flow foundation.”
19. MSCI (MSCI) – “MSCI is poised to learn essentially the most from robust expansion in its giant information answers.”
20. Nvidia (NVDA) – UBS likes Nvidia “given its main place within the GPU marketplace, a very powerful semiconductor used for AI.”
21. Oracle (ORCL) – “We consider estimates have most probably troughed and be expecting stabilizing earnings expansion in its cloud and large information providing.”
22. Taiwan Semiconductor (TSM) – UBS favors “TSMC for its defensive industry type and publicity to a couple of long-term expansion segments like synthetic intelligence and the Web of Issues.”
23. Texas Tools (TXN) – TXN must “have the benefit of the expanding semiconductor content material in automotive business, with AI and large information as further catalysts.”
24. Thomson Reuters (TRI) – TRI anticipated to “proceed gaining marketplace percentage, supported by way of its differentiated product choices to wisdom employees.”
25. VMware (VMW) – “VMWare will have the benefit of the rising pattern of enterprises’ migration to cloud.”

SA contributor JR Analysis is advising purchasing tech hand over fist.