AI could disrupt the digital economy, says UBS’ Ulrike Hoffmann-Burchardi

FEW DAYS FOR YOU. WE'LL CHECK BACK IN WITH YOU OF COURSE. ALSO, DON'T MISS THE CFO OF WELLS FARGO JOINING US TOMORROW ON THE SHOW 11 A.M. EASTERN. RIGHT AFTER THAT FIRM REPORTS. >> FOR MORE ON EARNINGS SEASON AND THE IMPACT ON YOUR PORTFOLIO, LET'S BRING IN UBS AMERICAS CIO, ULRIKE HOFMANN. HE JOINS US HERE AT POST NINE. IT'S GREAT TO HAVE YOU. THANKS FOR BEING WITH US. >> PLEASURE TO. >> BE HERE. YOU DO MAKE THE POINT THAT, I MEAN, I THINK YOUR YEAR END IS 8100 SOMETHING LIKE THAT. EARNINGS ARE GOING TO BE IMPORTANT THIS QUARTER. YES. >> EARNINGS ARE ALWAYS IMPORTANT FACTORIES. AND WE REMAIN CONSTRUCTIVE ON THE EARNINGS GROWTH IN THE S&P 500. THERE ARE TWO CAMPS RIGHT NOW. THERE IS THE COMPANIES THAT ARE MORE RESILIENT TO RATES. AND THEN THERE ARE THOSE COMPANIES THAT ARE MORE SENSITIVE TO RATES. BUT WE BELIEVE THE CAMP THAT IS MORE RESILIENT IS NOT ONLY DRIVING THE MAJORITY OF THE EARNINGS GROWTH THIS YEAR. WE BELIEVE THAT WILL CONTINUE. AND THAT CAMP IS VERY MUCH TIED TO THE AI INFRASTRUCTURE. BUILD OUT THE PICKS AND SHOVELS OF AI SO THAT SEMICONDUCTORS, BUT ALSO CLOUD COMPUTING. >> THAT'S A REALLY INTERESTING DEBATE RIGHT NOW. THE NOTION OF WHETHER THE AI ECOSYSTEM IS IMMUNE TO RATES, BECAUSE ON THE ONE HAND, IT MIGHT SEEM THAT WAY, BUT IF THEY REALLY WERE, WOULD WE BE SEEING SPREADS WIDEN THE WAY WE HAVE IN SOME INVESTMENT GRADE NAMES? >> I THINK WE ARE STILL QUITE EARLY IN THE AI INFRASTRUCTURE BUILD OUT AND ALSO IN THE APPLICATION LAYER OF AI. YOU JUST DISCUSSED A GENETIC AI THAT IS JUST STARTING TO EMERGE, THAT THAT MARKET, PHYSICAL AI. I THINK WE ARE CLOSE TO AN INFLECTION POINT THERE. AND BOTH OF THESE MARKETS COULD QUICKLY RAMP TO HUNDREDS OF BILLIONS OF REVENUE OVER THE NEXT 5 TO 10 YEARS. SO WE DON'T THINK THAT THERE IS NECESSARILY THE BEGINNING OF THE END FOR AI. WE'RE STILL IN THE EARLY INNINGS AND THE PRIVATE CAPITAL THAT STILL FLOWS INTO THE SECTOR IS ACTUALLY ACCELERATING. SO THAT FOR US IS ANOTHER TAILWIND TO THE PUBLIC COMPANIES EPS GROWTH. >> SO BY SEMICONDUCTORS AND HYPERSCALERS IS THAT THE UPSHOT. >> SO WE PREFER THE ATOMS OVER BITS. SO WE PREFER THE PHYSICAL ECONOMY OVER THE DIGITAL ECONOMY. WE THINK THE DISRUPTION RISK FROM AI MAY BE UNDERAPPRECIATED. AND IN SOME SENSE THE INTERNET AND THE DIGITAL ECONOMY DISRUPTED THE PHYSICAL ECONOMY. NOW AI COULD DISRUPT THE DIGITAL ECONOMY. WE HAVE SEEN THAT WITH AI CODING. >> SOFTWARE. >> SOFTWARE, RIGHT? THAT COULD UPEND TRADITIONAL SOFTWARE, BUT ALSO AI AGENTS COULD DEPEND ADVERTISING, DIGITAL ADVERTISING AND E-COMMERCE. SO WE ARE STILL QUITE EARLY IN UNDERSTANDING JUST HOW FAR REACHING. >> AND IS THAT. WE HAVE A GRAPHIC HERE, INDUSTRIALS THAT SORT OF MAKES SENSE GIVEN WHAT YOU JUST SAID. BUT DOES THAT EXTEND INTO HEALTHCARE AND FINANCIALS TOO? >> YEAH, WE LIKE WE LIKE HEALTHCARE AND PARTICULARLY BIOTECH AND PHARMA AS DIVERSIFIERS FOR PORTFOLIOS. BUT IT'S MORE THAN THAT. IT'S PLAYING OFFENSE AND DEFENSE AT THE SAME TIME BECAUSE ON DAYS AND YOU'VE PROBABLY SEEN THAT WHEN THE AI CAPEX TRADE HAS BEEN COME UNDER DURESS, HEALTHCARE ACTUALLY HAS BEEN A GOOD BALLAST TO THE PORTFOLIO.