UAE Investors Shift to AI Infrastructure

A notable trend has emerged in the UAE's retail investment landscape, with investors flocking to companies that provide the underlying infrastructure for artificial intelligence. This shift in focus is evident in the platform data from trading and investing app eToro, which reveals that investors are moving away from software businesses and towards companies that build the physical backbone of AI.

The data, which compares holdings among eToro's funded UAE users on the last day of the second quarter with the last day of the third, shows that Oracle led the list of risers, with an impressive 86 per cent quarter-on-quarter increase in the number of users holding the stock. This significant surge is followed by Grab Holdings, which saw an 83 per cent rise, and Sandisk, which experienced a 56 per cent increase.

What's driving the shift?

According to Josh Gilbert, lead analyst at eToro, UAE investors are following the AI money to where it is actually being spent. Gilbert points out that Oracle has become a key player in this space, with the company reporting a substantial increase in AI cloud contracts during its fiscal first quarter, totaling over USD 30 billion in new agreements announced in September. This significant investment in AI cloud contracts underscores the company's growing presence in the AI infrastructure market.

Gilbert also notes that investors in the region are looking beyond the well-known AI names to the suppliers of the chips, memory, and storage that AI workloads depend on.

Software stocks take a hit

On the other hand, software stocks have taken a hit, with customer experience software company NiCE seeing the largest fall, with holders down 84 per cent. Other notable fallers include e.l.f. Beauty, which matched NiCE's decline, and Wix.com, which fell 77 per cent. Gilbert attributes this decline to the fact that AI is quickly learning to do many of the tasks that these software companies provide, making them less attractive to investors.

Gilbert believes that companies like Salesforce, NiCE, and Accenture will need to demonstrate that AI is a genuine source of new revenue in their results before investor sentiment changes. This shift in investor sentiment is a significant indicator of the changing landscape of the AI and software industries.

Consumer stocks move in both directions

Consumer stocks have moved in both directions, with Nike rising to fourth among the risers after its shares fell to a 12-year low. In contrast, e.l.f. Beauty sat second among the fallers, which Gilbert sees as investors judging individual businesses rather than the sector as a whole. This nuanced approach to investing in consumer stocks reflects the complexity of the market and the need for investors to carefully evaluate each company's prospects.

The data from eToro provides valuable insights into the shifting trends in the UAE's retail investment landscape. As investors continue to navigate the complex and evolving world of AI and software, it is likely that we will see further changes in the way they allocate their investments.