Adam Clark

The war of words between Chinese and U.S. artificial-intelligence companies is heating up after Alibaba Group Holding's chairman questioned whether there was an American bubble in AI data centers. But investors should still back Amazon.com and other stateside peers to triumph, according to UBS.

Alibaba Chairman Joe Tsai said he was "astounded" by U.S. technology companies' on Tuesday at the HSBC Global Investment Summit in Hong Kong and questioned the need for spending hundreds of billions of dollars on AI data centers.

Amazon, Google-parent Alphabet, Microsoft, and Meta Platforms are expected to spend $302 billion in capital expenditure this year, up 35% from the previous year, wrote Mark Haefele, chief investment officer at UBS Global Wealth Management in a research note on Wednesday.

By comparison, Chinese companies Alibaba, Baidu, TikTok-owner ByteDance, and Tencent Holdings are expected to increase capex by 54% to $51 billion this year.

However, rather than being a bubble, that's the reason to back the U.S. tech sector to continue outperforming Chinese peers according to UBS. The demands of increasing computing capacity mean American companies will maintain a technological edge while also having a clearer path to profit, via stronger pricing power and a larger addressable market.

"The top three U.S. cloud platforms are projected to generate 12 times more cloud revenue than their Chinese counterparts, despite spending only 6-8 times more on cloud/AI capex," wrote Haefele.

Write to Adam Clark at adam.clark@barrons.com

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March 26, 2025 08:29 ET (12:29 GMT)

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