UBS: AI Theme Back on Top, Earnings Season Poised to Extend the Rally
N.R. Finch
UBS's internal 'theme barometer' puts AI back at No. 1 across all investment themes; the team expects the coming earnings season to reinforce the upgrade cycle and keep AI outperforming the broader market.
Why is AI back at the top of UBS's rankings?
Strategist Gerry Fowler's "theme barometer" — an internal tool that scores every investment theme by momentum — now shows AI back in the No. 1 slot.
Two drivers: earnings expectations still rising + improving macro backdrop. This means → AI's leadership is grounded in fundamentals, not just sentiment.
The recent pullback was driven by summer deleveraging, profit-taking, and position rebalancing. In plain terms = the industry outlook didn't change — money was rotating.
Why is earnings season the pivotal moment?
Fowler states directly: earnings season should reinforce the upgrade trend and drive further AI outperformance.
Analyst Stephen Ju adds that AI demand still outstrips infrastructure supply, and hyperscaler capex is more likely to be revised up than down.
This means → the logic chain — cloud giants spend more → AI supply-chain companies report better profits — remains intact. Earnings season is the window that tests it.
Beyond AI, what else does UBS like?
UBS upgraded healthcare at the same time, citing a near-end earnings-downgrade cycle, stabilizing regulation, and recovering sentiment.
Three sub-themes stand out: GLP-1 weight-loss drugs with long-term growth potential, large-cap pharma with resilient earnings, and biotech set to benefit from an M&A rebound.
AI is also penetrating healthcare — accelerating drug discovery, clinical development, and diagnostics, while pulling life-science tools out of an inventory downcycle. This reflects AI's influence spilling well beyond the tech sector.
Which themes are UBS avoiding?
UBS keeps consumer staples and consumer discretionary as its weakest-rated themes, seeing no sustained earnings-upgrade momentum in either.
Barclays data confirms the divergence: over the past 12 months, only 37% of stocks beat the S&P 500 — below last quarter's 40% and below the seven-year average.
In plain terms = market gains are concentrated in a handful of winners. Picking the right theme matters more than almost anything else right now.
Content is for reference only, not financial advice.