Investing.com -- UBS has revised its capital expenditure (capex) forecasts for the Big 4 tech companies upward, citing strong demand for frontier AI models and robust guidance from major firms during the latest earnings season.
“Contrary to the general perception that low-cost models like DeepSeek will result in near-term cuts to AI capex, we are actually raising our Big 4 capex estimates,” UBS analysts wrote.
The firm now expects Big 4 capex to grow 35% year-over-year in 2025, compared to its previous forecast of 25%. This would bring total spending to $302 billion, well above $224 billion in 2024 and more than double the $148 billion spent in 2023.
UBS analysts noted that “the near-term threat to AI capex from low-cost models is limited”, reinforcing their belief that AI compute spending trends remain strong.
They emphasized that “industry leaders continue to invest in pursuit of artificial general intelligence”, and as a result, the firm believes “the recent correction in AI compute stocks is overdone.”
The increased capex spending from Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and Microsoft (NASDAQ:MSFT) could be a tailwind for AI hardware suppliers, particularly Nvidia (NASDAQ:NVDA). UBS analysts stated that “given strong AI adoption and solid AI compute spending trends, we believe the recent correction in industry leaders like Nvidia and Broadcom (NASDAQ:AVGO) is overdone.”
While UBS remains bullish on AI adoption trends, it also warned that investors should remain cautious amid tariff-related risks.
“Investors cannot afford to be too complacent,” the analysts wrote, adding that they “should take advantage of volatility through structured strategies and by buying the dip in quality AI stocks.”
Despite potential volatility, UBS sees manageable risks to the Big 4’s high-end AI model strategy, maintaining its stance that “the AI addressable market is big enough for everyone to grow.”