The launch of ChatGPT in November 2022 was a pivotal moment in artificial intelligence (AI), driving its mainstream adoption. According to UBS analysts, this event stimulated significant investment and technological progress, which may have a potential impact on all sectors of the economy.

In a recent note to clients, the bank’s strategists emphasized that although the implementation of artificial intelligence is at an early stage, its investment potential is significant.

“As the AI ​​era begins, we recommend that investors focus on vertically integrated entities across the entire AI value chain,” they wrote, highlighting companies that combine clear monetization paths with robust competitive positions.

The potential size of the AI ​​market is enormous, with estimates ranging from Bloomberg’s $1.3 trillion by 2032 to McKinsey’s $4.4 trillion. UBS suggests that annual AI-related revenues could exceed $1 trillion over the next decade.

This growth is expected to be driven by improved productivity through AI tools for knowledge workers, of whom there are approximately 1 billion worldwide. For example, developers using AI tools like GitHub Copilot can code up to 55% faster, and customer service operations can become 30-50% more competent with generative AI.

UBS presents an investment framework covering three layers of the AI ​​value chain: enabling, intelligence and application layers.

The enabling layer includes the physical infrastructure, such as AI data centers, necessary to train and run generative AI models. UBS predicts annual capital expenditures for this tier will reach $331 billion by 2027, driven by investments in AI servers and data center infrastructure.

“Most of the enablement layer value is likely captured by AI servers,” UBS notes.

“Due to the scale of AI computing, most companies will likely use computing resources in the form of cloud services. As a result, we expect to generate $185 billion in value by 2027.”

The intelligence layer includes generative artificial intelligence algorithms and immense language models (LLMs) that utilize the computational resources of the supporting layer. This layer is still in the early stages of monetization and is expected to show robust growth due to its fundamental role in the development of artificial intelligence.

“We expect this tier to show the strongest growth through 2027, given its small base,” UBS emphasized.

Finally, the application layer, which includes AI-based applications and services, offers the greatest monetization potential, UBS strategists say. However, at this stage it is complex to estimate the possibilities involved, they added.

This layer includes tools such as AI copilots and personal assistants, which have already shown significant productivity gains. For example, Microsoft’s GitHub Copilot generated over $100 million in revenue in 2023 and grew 40% year over year with 1.3 million users.

“With a 50-60% increase in developer productivity, we expect an acceleration in software code creation,” the strategists wrote.

In the near future, UBS said that it sees the greatest opportunities in the artificial intelligence support layer. The bank continues to expect that the ratio of applications to enabling and wise layers will mean constrained profitability of the application layer in the early stages of cyclical and structural growth of generative AI.