Tech stocks delivered strong returns in 1Q24, led by AI. Industry-wise, semiconductors posted the best returns within tech globally, whereas the lower-margin hardware and IT services industries lagged, unsurprisingly. We maintain our positive view on the AI theme, given strong infrastructure spending trends and more tangible evidence of AI monetization. We point out five defining moments for AI in 1Q:

1. The first 2 trillion-dollar AI company is born
2. Strong fundamental growth revisions for AI
3. Broadening of AI customers and demand trends
4. New revolutionary AI products
5. Strong venture capital/private equity inflows in AI led by big tech

We continue to believe “big will get bigger” in the AI-era and that rising adoption should ease investor concerns that AI is a fad. We stay positive on global tech, and the AI trend in particular. To optimize tech exposure, we suggest diversified exposure to tech across regions and sectors, and using structured strategies as a means of managing impact from any near-term volatility. We believe that semiconductors and software continue to be the best ways to play the AI trend in 2024.

UBS CIO Equity Strategist Sundeep Gantori dives into the five key defining moments for AI in 1Q24 and his outlook for 2Q24.