Surge of interest in these UK tech stocks
Optimism at Nvidia failed to feed through to its share price overnight, but tech stocks this side of the pond have attracted lots of buying interest. City writer Graeme Evans looks at some big movers.
19th March 2025 14:55
by Graeme Evans from interactive investor
A bullish NVIDIA Corp (NASDAQ:NVDA) and strong performances by London-listed Softcat (LSE:SCT) and Bytes Technology Group Ordinary Shares (LSE:BYIT) have given investors a fresh look at the potential of artificial intelligence (AI) on both sides of the Atlantic.
Jensen Huang, founder and chief executive of the US tech giant, told Nvidia’s annual developer conference in California that “almost the entire world got it wrong” in questioning future demand for AI chips.
He predicted 100 times more computation would be needed than thought at the time of last year’s conference, arguing that processing demands are set to accelerate with the advent of applications like reasoning models.
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Deutsche Bank said after yesterday’s event: “Nvidia expects AI compute needs to grow, not slow and remains highly bullish about the future of AI compute spend.”
The company unveiled its upcoming Blackwell Ultra chips, a new partnership with General Motors Co (NYSE:GM) and gave a sneak peak at its future product road map, including next year’s Rubin chips.
The product pipeline and Huang’s enthusiasm on the demand outlook failed to prevent shares falling 3% by last night's closing bell, extending the year-to-date decline to 14%.
Despite this market volatility, UBS Global Wealth Management thinks the AI industry’s fundamentals are intact. And without taking single-name views, it adds that a recent fall in valuations has improved the risk-reward of leading AI semiconductor firms.
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At a time when US tech valuations are under strain, this week has seen a surge of interest in UK-listed software and IT services stocks.
Bytes Technology shares today consolidated their position near 490p after yesterday jumping 18% on the back of a forecast-beating year-end trading update.
The company, which helps organisations including the NHS and HMRC to integrate AI and to transform operations using Microsoft Copilot and other tools, said it achieved double-digit growth in a number of key financial metrics including operating profit.
The update reassured investors in relation to its long-standing relationship with Microsoft after the US tech giant’s introduction of a new rebate structure from the start of the year.
Panmure Liberum, which has a target price of 630p, said the update suggested that the company may be back to “beat and raise” after a period of estimates rolling over.
It added: “The UK lacks listed technology companies of scale. Bytes offers investors a way to gain exposure to software vendors which are taking a bigger slice of IT spend, have pricing power and will benefit from AI.”
Softcat, another technology reseller and IT solutions specialist, rose 8% on the back of the Bytes update before adding 170p to 1,793p on today’s robust interim results.
These showed a first-half performance slightly above the company’s initial expectations, with double-digit growth of 12.1% in gross profit and 19.3% in gross invoiced income. It also upgraded full-year operating profit guidance.
Chief executive Graham Charlton said: “We are excited by the rapid pace of innovation across our industry, with more organisations embedding AI and automation into their systems and processes.”
Shore Capital said the need for IT systems to stay current, supported and secure has become essential - not optional - across cybersecurity, cloud adoption, digital transformation, hybrid data centres, remote working solutions and AI.
It added: “This strong foundation paves the way for further positive developments and expansion even if GDP growth remains in the doldrums.”
The bank reiterated its Buy stance based on a near-term fair value estimate of 1925p, which FTSE 250-listed Softcat last neared in June 2024. Peel Hunt added: “Softcat is the best UK play on potential recovery in hardware spend over the next cycle.”
On Friday, Shore highlighted Bytes, Softcat and Kainos Group (LSE:KNOS) among the potential beneficiaries after a speech by Keir Starmer highlighted the case for AI to help deliver better public services.
It said: “The government will require the advice and support of IT services specialists in enabling the public sector to digitally transform and modernise.”
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