UBS Analyst Calls Nasdaq Cheap Amid AI Growth Era

UBS analyst Rickie Fowler characterized the current market as an "unprecedented growth era," stating that portions of the Nasdaq appear "outright cheap" when measured against the scale of sales growth being generated. Fowler noted that a period of summer de-risking and high single-stock volatility has concluded, with volatility dropping from over 50% to the mid-30s following a reassuring earnings season. This shift in market stability allows funds using leverage to increase their positions.

Addressing concerns regarding excessive capital expenditure, Fowler cited research from UBS analyst De'Mond Parker showing that CapEx grew to $650 billion from $300 billion a year ago. However, the backlog of cloud revenue based on data center growth has risen to $2.4 trillion. This backlog represents 100% of existing cloud revenue to be realized over the next several years, driven by the demand to move data onto platforms for AI use. Alphabet Inc. stated it can monetize approximately half of its cloud backlog within two years.