UBS urges investors to look past the US as AI concentration risk grows

UBS urges investors to look past the US as AI concentration risk grows

Proactive

Wed, August 19, 2026 at 3:12 PM GMT+3 2 min read

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Investors leaning heavily on American technology stocks should broaden their horizons, according to UBS, which sees fresh opportunities across Europe and Asia even as US markets keep hitting records.

In a strategy note, the Swiss bank said the S&P 500 should deliver further gains by the end of the year, but warned that the market's reliance on a handful of artificial intelligence winners had left portfolios dangerously concentrated.

Global stocks, measured by the MSCI All Country World Index, are trading close to record highs, buoyed by cooling US inflation and strong earnings both within the AI supply chain and beyond.

UBS argues the rally has quietly spread well beyond Wall Street, and that now is the moment to position for a broadening of gains.

Europe closest to home

European equities have room to break new highs, the bank said, with Stoxx Europe 600 companies on course for their strongest second-quarter profit growth in four years.

It pointed to a durable investment cycle underpinned by rising spending on defence, infrastructure, automation and energy security, helped by Germany's fiscal push.

UBS said any dips driven by geopolitical tension should be treated as buying opportunities, favouring banks, healthcare, industrials and consumer discretionary names.

Japan finds a floor

The bank also likes Japanese equities, where second-quarter operating profits are growing more than 20% year on year.

It believes the market has established a cyclical bottom, with a recent valuation reset opening up attractive entry points in high-quality companies.

UBS favours a mix of AI-related firms, including semiconductor equipment makers, alongside cyclical recovery plays such as banks and machinery.

Asia's earnings engine

The wider Asia-Pacific region rounds out the case, with UBS forecasting earnings growth of 72% this year and 20% next, driven by the region's AI hardware supply chain.

It remains constructive on mainland Chinese equities, preferring A-shares to H-shares, and has upgraded India to attractive on improving growth and more compelling valuations.

The concentration trap

Running through the note is a warning about crowded portfolios.

UBS said nearly 40% of self-directed investors on its platform hold more than half their money in 10 stocks or fewer, once strategic holdings are stripped out.

With the gap between the best- and worst-performing stocks unusually wide, the bank said outcomes now depend more than ever on what investors actually own, making diversification across regions and sectors essential.