AI is set to boom into a $90 billion industry by 2025 as ChatGPT generates investment frenzy, UBS Wealth Management CIO says

• UBS predicted that the artificial intelligence hardware and services market will hit $90 billion by 2025.
• It was worth around $36 billion in 2020, per IDC and Bloomberg Intelligence data.
• “We think the early success for chatbots could drive attract more technology talent, and drive faster adoption by enterprises and governments,” UBS said.

Buzzy artificial intelligence tools like ChatGPT have caused a renewed interest in the industry, with Wall Street giants predicting that the AI market will grow by several multiples in the next few years.

UBS Global Wealth Management forecasts that the AI hardware and services market will grow by a 20% compound annual growth rate and hit $90 billion by 2025, Solita Marcelli, the division’s Chief Investment Officer Americas, wrote in a client note on Tuesday. 

“Our estimate may prove to be conservative as growth in [large language models] and other generative AI technologies could be even faster than we expect given advancements in machine learning and deep learning capabilities,” the note reads.

The market was worth nearly $36 billion in 2020, per IDC and Bloomberg Intelligence data. 

ChatGPT is the fastest-growing consumer application in history, notching 100 million monthly active users just two months after its public launch in late November, per analytics firm Similarweb. 

“We think the early success for chatbots could drive attract more technology talent, and drive faster adoption by enterprises and governments,” Marcelli added.

The market forecast predicates itself on AI being a “horizontal technology,” meaning that it has important use cases across various industries. So far, AI has been integrated into businesses, spanning across media, healthcare, and aviation, to name a few.

“We view ChatGPT and other large language models as engines that will eventually power human interactions with computer systems in a familiar, natural, and intuitive way, and see strong interest from enterprises to integrate conversational AI into their existing ecosystem,” the note reads.

Investors are taking advantage of the frenzy, with a boost in share price for certain companies that integrate or use AI. 

C3.ai, an AI software provider, is up more than 100% year-to-date. Meanwhile, BuzzFeed surged over 200% in a day after making moves to boost its editorial content using AI. 

Outside of publicly-traded equities, Marcelli says traders can also consider allocation opportunities in private equity, as “we believe the tech sector is currently undergoing a new innovation cycle after 12–18 months of muted activity, which provides interesting and new opportunities that PE can capture through early-stage investments.”