The global wealth management arm of the Swiss bank says that while tariffs and other forces will cause AI-related stocks to be choppy, the overall investment case is robust, and has laid out market assumptions for this year and 2026.

UBS predicts “returns of around mid-teens” for global AI stocks this year and underlying technology developments will withstand volatility that rising tariffs may bring.

The bank commented a few weeks after revelations of China’s DeepSeek AI App – allegedly costing a fraction of what Western AI has cost to develop – sent shares in Big Techs such as chipmaker Nvidia down sharply. On the other hand, as if to drive home the AI theme, PC maker Lenovo Group yesterday posted a faster-than-anticipated 20 per cent rise jump in quarterly revenue thanks to demand for AI computing infrastructure. 

AI, the Swiss banking group says, is likely to be the dominant technology story of the decade, affecting areas including financial services and wealth management, as this news service is exploring.

“For global markets, excluding China, we forecast total AI spending to be close to $500 billion in 2026, the fourth year since the `ChatGPT moment,’ based on current and guided capex commitments from major tech companies,” the UBS Global Wealth Management Chief Investment Office said in a note. “We expect AI-related revenues, both direct and indirect, to also reach $500 billion by then. As a result, the combined AI end-demand opportunity in 2026 is likely to be close to $1 trillion."

UBS said that assuming an operating margin of 35 per cent, which it said is at the lower end of cloud platforms’ margins of 35 to 40 per cent and AI semiconductors’ 50 per cent, the operating profit opportunity for global AI should stand at around $350 billion in 2026. The bank has put a multiple of 30x next year’s operating profits, in line with levels seen in quality growth companies, to get a sense of the market capitalisation of the sector. As such, UBS said that by the end of 2025, the sector’s market cap will stand at $10.5 trillion. 

“Looking at what has been priced in so far – $9 trillion in market capitalisation for global AI names – we see returns of around mid-teens for 2025,” UBS continued. 

“We continue to highlight that tariff- and export control-related uncertainty will likely spur periods of tech volatility ahead. But we also see solid fundamentals from quality AI companies that continue to point to strong investment commitments and improving monetisation trends. Investors should consider taking advantage of volatility through structured strategies and by buying the dip in quality AI names,” UBS said.