UBS expects demand for AI computing and infrastructure to remain supported, but says the market will increasingly focus on whether revenue and profits are keeping pace with investment as the AI trade enters its fifth year. The bank forecasts average year-on-year cloud revenue growth among hyperscalers to rise to 58% in the September quarter, up from 48% in the June quarter. ASML reports results on Wednesday, while major cloud providers are due to publish earnings later this month, providing near-term tests of the demand outlook.
Meta Muse tops 6.6 million downloads
Meta's Muse AI assistant recorded more than 6.6 million downloads in its first month, with 1.8 million daily active users, UBS said, citing data from Sensor Tower. Unlike conventional chatbots that mainly answer questions, AI agents can carry out tasks on a user's behalf. Wider adoption could therefore generate new sources of AI usage.
UBS cautioned that other recently launched AI agents have not yet been available long enough to assess user acceptance with confidence. Subscription fees, advertising and transaction-based services could become potential monetization routes for consumer AI agents. If usage expands, these products could also increase demand for cloud computing, creating a more direct link between hyperscalers' infrastructure spending and revenue growth.
Chip and server data point to resilient demand
Recent results from semiconductor and hardware companies have also indicated continued strength in demand for AI infrastructure. TSMC reported a 51% year-on-year increase in quarterly revenue, while Samsung said ahead of its full earnings release that quarterly operating profit was close to nine times higher than a year earlier. AI server assembler Hon Hai Precision Industry posted sales above market expectations, and chip designer Marvell raised its revenue forecast for fiscal 2028.
UBS expects third-quarter results to provide further evidence on demand for AI computing capacity and infrastructure. For investors, order activity across the chip, server and data-centre supply chain remains an important indicator of whether spending by major technology companies is continuing. However, the scale of investment alone does not show that the spending has already translated into equivalent revenue.
Cloud revenue growth will test infrastructure spending
UBS forecasts average year-on-year cloud revenue growth of 58% for major hyperscalers in the September quarter, compared with 48% in the June quarter. The measure is closely watched because large cloud companies are both major buyers of AI chips and data-centre equipment and providers of computing capacity, storage and AI services to businesses.
An acceleration in cloud revenue would point to stronger customer usage and payment for those services. If revenue falls short of expectations, investors may reassess the potential returns from data-centre expansion and AI chip purchases. Earnings from the major cloud providers later this month will offer a fresh basis for judging that outlook.
UBS flags growth, funding and security concerns
UBS said concerns over growth prospects, financing and security could still contribute to periods of volatility in AI-related assets. As the earnings season approaches, the bank expects reported results rather than industry narratives to remain the central focus. It favours diversified exposure across high-quality semiconductor and hardware companies, major technology platforms and technology businesses with relatively stable profitability.
In the near term, ASML is scheduled to report on Wednesday, followed by earnings from major cloud service providers later this month. If cloud revenue growth falls short of UBS's forecast, highly valued large technology companies could face greater pressure. US inflation data that pushes Treasury yields higher could also weigh on the valuations of long-duration technology stocks.