AI investments will drive further equity gains in 2026, says UBS

(Sharecast News) - UBS has recommended investors to allocate up to 30% of their equity portfolios in 2026 on structural trends like AI, which are expected to fuel further market gains next year. In its year ahead outlook, the Swiss bank's chief investment office said that "powerful trends" in capital expenditure and accelerating adoption should "drive further growth for AI-linked stocks".

The report predicted a broadly positive economic backdrop for 2026, with GDP growth at 1.7% in the US, bolstered by "favourable financial conditions and accommodative fiscal policies". Meanwhile, growth should be 1.1% across the eurozone, while Asia Pacific economies should expand by around 5%.

As a result, global equity markets are expected to rise by a further 15% on average by the end of 2026, despite many major indices already trading at record highs.

"Solid US growth and accommodative fiscal and monetary policy favour technology, utilities, healthcare and banking, with gains likely in the US, China, Japan and Europe," the bank said.

Specifically, it recommended allocating "up to 30% of a diversified equity portfolio to structural trends including AI, longevity, as well as power and resources". Its base-case scenario points to continued solid investment in AI, with steady adoption and gradual monetisation.

China's tech sector, in particular, is the standout global opportunity next year, with strong liquidity and retail flows expected to drive earnings 37% higher.

However, UBS did warn of risks that could "bring markets back to earth", including a "potential disappointment" in AI progress and adoption, a possible resurgence in inflation, heightened trade tensions between the US and China, and the re-emergence of sovereign or private debt concerns.

"As we look ahead to 2026, the question is whether the powerful forces of AI, fiscal stimulus, and easing monetary policy can propel global markets beyond the gravity of debt, demographics, and deglobalisation, toward a new era of growth," said UBS's chief investment officer Mark Haefele.

"Navigating these structural shifts demands that investors adapt their strategies by focusing on sectors and themes where capital is flowing and transformation is taking place."