Nvidia-fueled tech rally will slow, but the sun isn’t setting on AI anytime soon By Investing.com

Investing.com — The Nvidia-fueled tech rally is likely to slow and become volatile as economic headwinds and chip regulation weigh in, but the sun may not be setting on AI anytime soon.

“Future gains in global technology stocks should be more gradual after the rapid rebound of the past three weeks, with potential headwinds from US macroeconomic data and additional news on semiconductor export controls likely to add to volatility,” UBS said in a recent note following a decline in Nvidia.

NVIDIA Corporation (NASDAQ: ), a key player in the AI ​​sector, fell 6.4% on Thursday despite reporting a 122% year-over-year increase in revenue to $30 billion, driven by a 154% increase in data center revenue. The depression suggests investor enthusiasm may be cooling due to “heightened expectations”, analysts said.

But while the pace of the tech rally is expectedly cool, the sun isn’t setting on the broader theme of AI as enterprise spending on this emerging is likely to remain strong.

Big tech companies are on track to increase their capital spending by 43% year over year, with leaders like Alphabet (NASDAQ: ) and Microsoft (NASDAQ: ) underlining their commitment to AI investments.

Alphabet CEO Sundar Pichai noted that “the risk of underinvestment is dramatically greater than the risk of overinvestment.”

It’s not just big tech getting ready to spend big on AI. Walmart (NYSE: ) CEO Doug McMillon recently noted that “the use cases for this technology are broad and affect almost every part of our business,” adding that the company will “continue to experiment and implement AI and generative AI applications. globally.”

Amid the still growing appetite for AI, UBS advises investors with low existing AI holdings to consider increasing long-term exposure, while those with high allocations may benefit from exploring capital preservation strategies as a hedge.

“We continue to have a positive structural view on the broader AI theme and see ways in which investors can manage their exposure to the technology that we believe will drive growth in the coming years,” UBS added.