AI will grow into a $225 billion market by 2027 as the 'tech theme of the decade,' UBS says
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- Broader AI use will take it from a $2.2 billion to $225 billion market by 2027, UBS said.
- There will be an accompanying revenue increase of 15 times between 2022 and 2027.
- AI software and semiconductor firms will be the biggest beneficiaries in the coming years.
The tech industry is only in the first inning of a massive growth cycle, as broader use of artificial intelligence across economies will turn it into a $225 billion market by 2027, UBS said in a note published Tuesday.
That marks a significant jump from just $2.2 billion in 2022, and signals a near 152% compound annual growth rate.
UBS expects the AI industry to see an accompanying 15-fold revenue increase, rising from $18 billion in 2022 to $420 billion in 2027. The forecast is a 40% upside revision from UBS's earlier calls, which the researchers acknowledged may have been too conservative.
Stronger-than-expected demand will be a boost for AI software moving forward, fueling a 138% CAGR for the application sector.
"If the launch of the ChatGPT application is the iPhone moment for the AI industry, the recent rollouts of numerous applications like copilots and features like Turbo and vision from OpenAI in 4Q23 mean the App Store moment for the AI industry has arrived, in our view," the report said
Meanwhile, increased clarity around AI infrastructure spending will also contribute to tech's multi-year momentum, the note said. The segment is expected to grow from $25.8 billion in 2022 to $195 billion in 2027.
"This will likely make AI one of the fastest-growing and largest segments within global tech and arguably the 'tech theme of the decade,' as we don't see similar growth profiles elsewhere in tech," the report said.
2024's biggest beneficiaries from increased spending will be hardware chips and GPUs on which AI is trained and run on. This will offer a tenfold boost for semiconductor and platform firms, helping industry revenues surge from $15.8 billion to $165 billion.
Though some investors may be concerned about growing regulatory rhetoric around AI, earlier rule implementation is preferable over late-growth restrictions.
"In summary, regulations are worth monitoring as a risk, including export controls, but as we highlighted recently in our semiconductor thematic note, an excessive correction due to geopolitics or regulations could present a buying opportunity," UBS said.