Buy these 17 'superstar' stocks poised to soar as they use AI technology to drive market-beating growth, UBS says

  • UBS analyst Paul Winter says artificial intelligence technologies are giving the world's largest and most profitable companies a big advantage. 
  • He says that because those companies can spend more money in AI, they benefit more than smaller competitors do — adding to their sales and hiring and enabling even more investment.
  • Winter names a group of companies as "superstars" that will continue to benefit from that pattern.
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The machines are rising, and the world's most successful companies are rising with them.

Paul Winter of UBS' quantitative research team says that as new technologies like machine learning, natural language processing, and computer vision transform businesses, the biggest and richest companies are reaping more benefits than anyone else. That puts them in a class by themselves.

"AI facilitates the rise of 'Superstar' firms expanding product offerings and geographical reach," Winter wrote in a note to clients. "From a style perspective, this seems to indicate that large, profitable, expensive firms, 'Superstars' are likely to continue to outperform."

Citing Tania Babina, an assistant research professor at Columbia Business School, Winter writes that a virtuous cycle develops. Bigger and more profitable companies are able to invest more money in AI, which leads to better sales and more hiring, which leads to more growth.

The result is increasing industry concentration, which enables more investment in technology. And he says that pattern is playing out across the world, although it's especially clear in some tech and consumer sectors and in the US, China, and Asia-Pacific region. 

"The benefits from AI are likely to accrue primarily to larger firms for two reasons: Firstly, larger firms are more likely to have the resources to invest in AI, and secondly, larger firms are likely to accumulate extensive datasets, hence they are more likely to experience greater productivity efficiencies."

All of that is helping a small number of expensive, high-growth companies that investment professionals almost have to own if they want to keep up at the market, Winter says.

That means profits are growing more concentrated at the top of each industry, giving the stocks of those companies a boost, he says. Those gains come at the expense of not only rival companies, but small-cap stocks, because bigger and more expensive stocks are delivering better sustained performance.

He adds that this AI spending has also been devastating value stocks, which have delivered disappointing returns for a long time.

UBS analyst Paul Winter says that as AI spending grows, returns for value stocks sink.UBS

Winter says the effects of this cycle are still getting stronger. That means his "superstars" might only get more super. He writes that the following 17 global companies are set to benefit from that trend.

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1. Zoom Video Communications

Ticker: ZM

Country: USA

Sector: Information technology

Market cap: $11.2 billion

Year-to-date performance: +465.1%

Source: UBS

2. Nvidia

Ticker: NVDA

Country: USA

Sector: Information technology

Market cap: $314.3 billion

Year-to-date performance: +109.3%

Source: UBS

3. Booking Holdings

Ticker: BKNG

Country: USA

Sector: Consumer discretionary

Market cap: $76.8 billion

Year-to-date performance: -11.5%

Source: UBS

4. ASML Holding

Ticker: ASML-NL

Country: Netherlands

Sector: Information technology

Market cap: $167.9 billion

Year-to-date performance: +15.2%

Source: UBS

5. EQT AB

Ticker: EQT-SE

Country: Sweden

Sector: Financials

Market cap: $17.9 billion

Year-to-date performance: +55.4%

Source: UBS

6. Evolution Gaming Group

Ticker: EVO-SE

Country: Sweden

Sector: Consumer discretionary

Market cap: $13.3 billion

Year-to-date performance: +99.6%

Source: UBS

7. NetEase

Ticker: NTES

Country: China

Sector: Communication services

Market cap: $68.5 billion

Year-to-date performance: +49.9%

Source: UBS

8. Taiwan Semiconductor

Ticker: 2330-TW

Country: Taiwan

Sector: Communication services

Market cap: $68.5 billion

Year-to-date performance: +31.9%

Source: UBS

9. Naver

Ticker: 035420-KR

Country: South Korea

Sector: Communication services

Market cap: $46.1 billion

Year-to-date performance: +64.1%

Source: UBS

10. M3

Ticker: 2413-JP

Country: Japan

Sector: Healthcare

Market cap: $42.3 billion

Year-to-date performance: +84.3%

Source: UBS

11. Eisai

Ticker: 4523-JP

Country: Japan

Sector: Healthcare

Market cap: $26.5 billion

Year-to-date performance: +13.1%

Source: UBS

12. Fortescue Metals

Ticker: FMG-AU

Country: Australia

Sector: Materials

Market cap: $40.6 billion

Year-to-date performance: +67.4%

Source: UBS

13. Magellan Financial

Ticker: MFG-AU

Country: Australia

Sector: Financials

Market cap: $8.0 billion

Year-to-date performance: +1.2%

Source: UBS

14. Aristocrat Leisure

Ticker: ALL-AU

Country: Australia

Sector: Consumer discretionary

Market cap:  $13.5 billion

Year-to-date performance: -14.3%

Source: UBS

15. Lens Technology

Ticker: 300433-SHE

Country: China

Sector: Information technology

Market cap: $23.3 billion

Year-to-date performance: +147.3%

Source: UBS

16. Shenzhen Kangtai Biological Products

Ticker: 300601-SHE

Country: China

Sector: Healthcare

Market cap: $19.0 billion

Year-to-date performance: +91.8%

Source: UBS

17. Contemporary Amperex Technology

Ticker: 300750-SHE

Country: China

Sector: Industrials

Market cap: $71.5 billion

Year-to-date performance: +76%

Source: UBS

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