The AI data-center buildout is still early, and UBS says investors can cash in through investments across the technology, media and telecommunications sectors

UBS sees room for Amazon's stock to rise 25%, thanks to AWS.

The artificial-intelligence spending cycle is still early, according to UBS analysts - and that affords investors a number of compelling opportunities across the technology, media and telecommunications sectors.

The UBS team just shared 14 of their "highest-conviction calls" within those sectors, many of which are levered to AI and the idea that there's plenty of money floating around the broader ecosystem.

When it comes to AI growth, "the next leg should come from enterprise adoption," the analysts said in a Thursday note to clients, adding that of the companies they've surveyed on agentic AI deployment, just 8% have done so at scale. The team also sees more spending on AI infrastructure as enterprises consolidate vendors and cut IT budgets.

While open-source AI models are gaining traction for their perceived cost benefits, the UBS analysts noted that companies often deploy them through cloud platforms such as Microsoft (MSFT) Azure and Amazon.com's (AMZN) Amazon Web Services.

Amazon is the team's top pick among large-cap internet companies, and with UBS estimates for AWS revenue above the consensus, the analysts expect that Wall Street "should catch up" given the company's larger customers are preparing to deploy its Trainium 2 and Trainium 3 chips later this year into 2027. UBS's $318 price target on Amazon's stock is about 25% above current levels.

Among chip and semiconductor-equipment companies, UBS's top pick is analog chip maker Texas Instruments (TXN). The analog chip cycle, which is mostly driven by the automotive and industrial markets, is on the upswing, the analysts said, and Texas Instruments has been growing its share of the market.

As industry momentum builds and as the data-center boom creates more growth opportunities for the company, the analysts said Texas Instruments looks positioned to capture more market share and accelerate its free cash flow, a measure of money left behind after companies cover their costs and capital investments.

"Even if growth in data center decelerates slightly next year," the analysts said Texas Instruments' total revenue should be able to grow by about 20%. The UBS team sees room for Texas Instruments shares to rise 43% to $380.

Within telecom and networking equipment, UBS said Celestica (CLS) stands to benefit from OpenAI's ramp of its first custom chip next year, which they see supporting revenue growth of at least 70%. Celestica is already a top provider of Ethernet switching technology to hyperscalers such as Alphabet's (GOOGL) (GOOG) Google and Meta Platforms (META), the analysts noted.

UBS analysts predict 29% upside for Celestica shares via their $430 price target.

The data-center buildout should also be a boon for global information-technology distributor TD Synnex $(SNX)$, UBS said, given its role as a manufacturing partner for large cloud-service providers.

The company's Hyve Solutions business, which provides custom hardware such as servers and networking equipment for data centers, should benefit from increasing demand for faster processing and networking, the analysts said. The UBS team is modeling that capital spending on data-center infrastructure will grow at least 30% annually throughout the next three years.

TD Synnex's stock can rise 32% to $352, the analysts said.

Meanwhile, the analysts see Palantir Technologies (PLTR) "at the nexus of the two most powerful spending trends in software - AI and data." With the team expecting Palantir's revenue to grow 88%, and its margin, or measure of profitability, to be in the low-60% range, UBS said Palantir's shares look "very attractive." They trade at $177.64, but the UBS price target is $250.

Additionally, the team said Palantir has "a very strong demand backdrop for its AI and automation software," and faces little competition there from other AI and software providers.

The UBS team's other top picks in the TMT space are SS&C Technologies $(SSNC)$, AT&T (T), EchoStar (ECHO), Pinterest (PINS), Spotify Technology (SPOT), Mastercard (MA), Global-e Online $(GLBE)$, Procore Technologies (PCOR) and JFrog $(FROG)$.

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-Britney Nguyen