In a world where technological innovation is reshaping the economy, artificial intelligence (AI) is the center of attention. Achille Monnet, Equity Research Analyst at UBS, gives us his analysis of the major trends in this rapidly changing sector, its implications for the financial markets and the investment opportunities it creates.
Of course. I am an Equity Research Analyst at UBS and I have been working in Zurich for several years. My background is international: I grew up in Singapore before studying in England, then I joined UBS where I first covered several sectors of activity, before specializing in the technology sector. Since August 2022, I have been conducting in-depth analysis of the dynamics transforming the technology industry, with a particular focus on artificial intelligence.
I am part of the CIO (Chief Investment Office) at UBS, which brings together a pool of analysts specialized by sector and region. My role is to identify the major trends in technology in Europe and to support our clients in their investment decisions. Our integrated approach is very distinctive: we do not settle for isolated analysis, but work closely with experts and strategists to provide informed recommendations to investors.
We are currently identifying three major structural transformations in the semiconductors industry. The first major change is in the evolution of computer chips: we have moved from conventional processors (CPUs) to specialized processing units (GPUs), optimized for training AI models. Then, we are witnessing a transformation in memory technologies, with the emergence of more efficient solutions, particularly from Korean players. Finally, advances in manufacturing, dominated by companies such as TSMC (Taiwan Semiconductors Factoring Company), are fundamental to supporting this transition.
We can identify three key sectors where AI is already having a significant impact. The first is software development, where companies such as Google have announced that 25% of their code is now written by AI models, with a projection of 60% in the short term. Then there is digital advertising, a huge market worth 600 billion dollars a year, which is already being transformed by AI, which improves engagement and conversion rates. Finally, customer service benefits from the automation and optimization of interactions thanks to AI models. For AI to remain a driver of sustainable growth, it will have to continue to expand into other industries, such as pharmaceuticals, where its potential is immense.
Our approach is based on in-depth, multi-level analysis. We seek to anticipate where an industry will be in 3 to 5 years’ time and which players will be best positioned. We focus on several areas: identifying the leading companies, analyzing their competitive advantages and their ability to maintain these advantages. We also examine the future profitability and economic structure of these companies. Finally, we compare our assessments with market data and macroeconomic trends in order to provide relevant investment recommendations.
We regularly organize events, conferences and one-on-one discussions with our clients to help them navigate this complex world. There is a real need for education on AI, as this new technology is so highly publicized. Our role is to provide accurate and pragmatic insight to help our clients define their investment strategies.
The recent market movements are mainly the result of the uncertainty caused by his behavior, which is difficult to predict. Two risk elements dominate this situation: the risk of positioning, with investors having bet heavily on technology stocks, and the geopolitical uncertainty that could affect the strategy of large companies. Nevertheless, fundamentally, the foundations of the sector remain solid.
Finance presents a tremendous opportunity for AI, as banks have considerable technological resources and budgets. However, one of the major challenges is error tolerance. Financial systems require extreme precision, which limits the direct application of AI to critical functions. On the other hand, the automation of back-office processes and the optimization of customer services are already underway. It is also a strategic lever for banks, which can use AI to improve their competitive advantage.
The United States is undoubtedly in the lead, thanks to its highly advanced software ecosystem and capacity for innovation. The speed of adoption and the scale of investment give American companies a decisive advantage. China is trying to compete, particularly with players such as Deepseek, but the gaps remain significant.
The cost of AI is decreasing exponentially. Alphabet Inc has seen a 90% drop in a year, suggesting an explosion in demand as access to this technology becomes more widespread. The history of technological advances shows us that falling costs stimulate innovation and open the way to new and unexpected uses. However, the differences between regions remain marked: American companies, thanks to their capitalization and investment capacity, have a clear advantage over their European or Asian competitors.
