UBS says its even more convinced Gen AI will boost productivity. Raises equity forecast.

UBS jacked up their forecast for the MSCI All-Country World Equity Index year-end forecast from 800 to 830. Analysts at UBS cite if generative AI raises productivity growth.

• “We have become even more convinced Gen AI will boost productivity and highlight further strong evidence of the benefits of automation, efficiency, personalization and creativity uses of Gen AI”
• If productivity growth is 1% higher “then, the potential upside on the ERP model is 17%, as 1% off unit labor costs adds 9% to profits; U.S. unit labor costs would be running at 0.5% to 1%, and thus the Fed could cut very aggressively if growth slowed below trend; and it would confirm that full employment is much lower than 4.1%.”

Info via UBS' Global Equity Strategy report.