UBS, Switzerland's largest bank, has named three players in the artificial intelligence sector whose shares are the most promising at the moment. The bank's analysts believe that the quotes of these companies will be supported by the demand for new capacities for training neural networks and the growing demand for AI solutions both from businesses and ordinary consumers.

Details 

«In terms of investment ideas derived from our demand analysis, we remain bullish on Nvidia stock and highlight Broadcom as key beneficiaries of demand for computing and networking solutions. In addition, we consider Micron one of the indirect beneficiaries of the growing need for memory chips,»  quoted by CNBC in a note from UBS to clients.

The bank believes that the need to train new language models and the growing use of consumer AI applications, fueled by the popularity of ChatGPT and new products from Meta, Google and Amazon, will drive strong demand for Nvidia chips in the coming years. And with it, cloud infrastructure, hardware and related technologies. 

According to UBS, the riskiest area is the implementation of AI in the corporate segment. Companies act cautiously, the return on investment is not always obvious, and individual projects require special customization. But even these risks look manageable so far, the bank noted.

What's going on with the stock

Nvidia shares hit an all-time high on June 26, and the company's capitalization reached $3.8 trillion - making it once again the world's most valuable company. Nvidia CEO Jensen Huang said it has long stopped thinking of itself as a chipmaker - it is now working on a future of «billions of robots, hundreds of millions of autonomous cars, and hundreds of thousands of robotic factories powered by Nvidia technology.» The stock is up 16% since the beginning of the year.

Broadcom has also added 16% this year. HSBC this week raised its rating on the company's stock from a neutral «hold» to a «buy» recommendation. The bank set a target price of $400 a share, the highest target on Wall Street, which implies a 48% increase from the closing level on June 26.

Micron, another beneficiary of the AI boom, has gained 47% since the beginning of the year. The company's revenue and earnings last quarter beat expectations. For the current quarter, Micron counts sales of $10.7 billion - up 38% from a year ago.

What Wall Street is advising

Wall Street considers shares of Nvidia, Broadcom and Micron a favorable investment. Their consensus ratings are Buy and Overweight (both consistent with a Buy recommendation). FactSet's calculated average target prices suggest Nvidia is up 12%, Broadcom is up 6.8%, and Micron is up 17.4% over the next year.

This article was AI-translated and verified by a human editor

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