Investing.com -- UBS believes the risk-reward profile for leading AI semiconductor stocks is improving, pointing to strong innovation, better valuations, and continued growth in AI computing demand despite market volatility.
In a Tuesday report, the investment bank highlighted Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing (NYSE:TSM), and ASML (NASDAQ:ASML) (AS:ASML) as key beneficiaries of this trend.
“Despite broader market volatility, we think strong productivity gains coupled with solid supply chain checks and innovation mean the AI industry’s fundamentals are intact,” UBS strategists led by Sundeep Gantori said in a note.
“With strong performance improvements over the next decade, we see improving risk-reward across quality AI semiconductors like NVIDIA, Broadcom, TSMC, and ASML,” they added.
NVIDIA’s GTC 2025 event reinforced its dominant position in AI hardware, with the company unveiling the Blackwell Ultra chip, which offers moderate performance improvements and is set to begin shipping in the second half of 2025.
UBS expects this new lineup to sustain NVIDIA’s strong growth into early 2026, ahead of the introduction of its next-generation Rubin chips.
In the networking sector, Broadcom continues to leverage its leadership for its custom AI chip projects, alongside Nvidia.
Meanwhile, TSMC remains central to semiconductor advancements through its expertise in advanced packaging, which is crucial for enhancing processing power, while ASML “is well positioned to benefit from Moore’s Law,” strategists said.
Moore’s Law states that the number of transistors on a chip doubles approximately every two years, driving exponential growth in computing power and efficiency.
While UBS acknowledges near-term risks, including heightened market volatility and uncertainty around tariffs, the firm believes that long-term AI trends remain intact.
UBS notes that past trade disputes, such as those in 2018, led to sharp declines but were followed by strong rebounds as investors refocused on fundamentals.
“With elevated market volatility amid near-term tariff uncertainty, we recommend investors continue to take advantage of volatility through structured strategies and by buying the dip in quality AI stocks,” strategists said.
