UBS has warned of greater market volatility next year, citing risks ranging from weaker-than-expected artificial intelligence revenue to geopolitical tensions, but the Swiss investment bank remains bullish about Chinese technology shares and gold.
UBS identified five major market risks for next year: economic weakness, a resurgence of inflation, government debts, renewed US-China conflicts, and disappointing returns from AI after three years of heavy investment.
"One point that we can be very sure of is that the volatility will be bigger," said Hu Yifan, regional chief investment officer at UBS Global Wealth Management, at a press conference on Thursday. While global investments in AI would continue, markets were increasingly questioning how much profit such spending could generate, Hu added.
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Since last year, some US market heavyweights like Michael Burry have warned of a potential AI bubble. Nvidia's slumping shares deepened the concerns.
Hu Yifan (left) and Eva Lee of UBS, which says today's AI boom differs from the dot-com era. Photo: Themis Qi alt=Hu Yifan (left) and Eva Lee of UBS, which says today's AI boom differs from the dot-com era. Photo: Themis Qi>
UBS, however, believed the AI boom differed from the dot-com era. Eva Lee Chi-wing, head of Greater China equities at UBS, said global tech giants were now better positioned to withstand shocks, given their strong cash flows and limited reliance on debt to fund investments.
With Chinese tech companies leading in AI applications, Lee estimated earnings growth of up to 37 per cent next year, adding that Chinese tech stocks "are still not expensive".
Following the Hang Seng Tech Index's 29 per cent surge this year, UBS set a target level of 7,100 by the end of 2026, indicating a nearly 27 per cent jump from Thursday's close of 5,598. For the broader market, UBS projected the MSCI China Index could reach 100 next year, about 18.7 per cent higher than Wednesday's level of 84.27.
Hu said higher risks also brought higher returns, urging investors to further diversify their portfolios to capture opportunities.
Beyond equities, UBS recommended allocating at least 5 per cent of portfolios to gold as it expected the metal to hit as high as US$4,900 per ounce.
Matthew Quaife and Niamh Brodie-Machura of Fidelity, which says AI will begin to benefit the broader economy. Photo: Julie Zhang alt=Matthew Quaife and Niamh Brodie-Machura of Fidelity, which says AI will begin to benefit the broader economy. Photo: Julie Zhang>
繼續閱讀Meanwhile, global fund managers were expected to move more money into Asia next year amid a weakening US dollar and an AI investment upcycle that would likely run for years, said Matthew Quaife, global head of multi-asset investment management at Fidelity International.
China increasingly resembled the US market in terms of technological progress and innovation, and the gap between the two countries was rapidly narrowing - yet valuations of Chinese tech companies were still low, according to Niamh Brodie-Machura, chief investment officer for equities at Fidelity International.
"We expect to see the rising adoption of technology and artificial intelligence to begin to benefit the broader economy," Brodie-Machura added.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
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