No AI fatigue yet, investors still bullish on trade: UBS' Gautam Chhaochharia

Global and regional investors remain firmly bullish on the artificial intelligence trade, with no immediate signs of fatigue despite concerns around crowded positioning in technology stocks, according to Gautam Chhaochharia, Head of Global Markets at UBS.

Speaking to CNBC-TV18 from the UBS Asia Investor Conference in Hong Kong, Chhaochharia said AI emerged as one of the dominant themes in investor discussions across Asia, particularly around technology markets such as Japan, Korea and Taiwan.

“The AI fatigue part is very interesting because that's one of the first things we picked up when we started this conference — a debating point among these regional or global investors,” he said.

However, after multiple thematic sessions and interactions with technology experts, macro economists and global companies, UBS believes the current AI cycle still has strong fundamental support.

“The fundamentals don't support any immediate AI fatigue,” Chhaochharia said.

According to him, investors remain convinced that earnings visibility in AI-linked businesses continues to hold up, reducing the likelihood of a near-term reversal in sentiment.

“Whatever we have heard till now from all the experts doesn't seem to suggest that,” he said. “They're not really looking to get out of that trade in a hurry.”

Chhaochharia said valuations in several global AI-linked sectors are also not viewed as excessive at this stage, despite the sharp rally seen in recent quarters.

“On a headline basis, these sectors and companies globally or in Asia are nowhere near rich. They are still attractively valued,” he said.

The UBS executive also highlighted growing investor interest in AI ancillary themes, including energy and power equipment, which are increasingly being seen as indirect beneficiaries of the AI investment cycle.

“That theme of the AI ancillary supply chain, or the entire value chain, is a global theme, not just in India,” he said.

According to him, segments linked to power infrastructure and equipment are witnessing strong momentum globally as demand for AI-related computing infrastructure rises.

“When you talk about power or power equipment around that, that theme has been working very well globally, not just in India, and there is a mini bull market in that space,” Chhaochharia added.

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He noted that while some institutional investors may trim exposure because of portfolio concentration limits, there is little evidence of broad-based investor exhaustion around the AI trade.

“There will be some investors who will have constraints like the typical one where they can hold only 10% of the fund in one stock,” he said. “But otherwise, there is absolutely no AI fatigue.”