Despite widespread talk of an artificial intelligence (AI) bubble, both major asset managers remain committed to backing the investment wave.
In their outlooks for the coming year, the two investment firms spotlight the transformative potential of AI, but offer contrasting takes on risk, concentration, and regional opportunities.
For Swiss-headquartered UBS, it highlighted the current push and pull present in global markets.
On one side, Andrew McAuley, chief of investments at UBS Global Wealth Management Australia, pointed to the “interplay of AI innovation, fiscal stimulus, and easing monetary policy,” which the firm expects to drive further gains.
On the other hand, McAuley highlighted several counteracting drags.
“Investors should be aware that several risks still remain, including de-globalisation, trade tensions, and mounting debt,” he said.
The firm maintained an optimistic outlook for 2026, expecting a supportive economic backdrop to lift equities, with growth gaining momentum in the year’s second half.
“In the US, growth is expected at 1.7 per cent, backed by more favorable financial conditions and accommodative fiscal policies. Eurozone GDP is forecast to grow at 1.1 per cent, while APAC’s economic growth should reach the 5 per cent range,” UBS stated.
With AI and technology driving global equity markets this year, UBS has thrown its support behind its momentum to continue. Being mindful of bubble risks, it recommended an up to 30 per cent allocation to AI and related structural trends as part of a diversified equity portfolio.
The firm also advised investors to add to equities more generally, highlighting technology, healthcare, utilities, and banking as the sectors poised to benefit from supportive fiscal and monetary policies.
Overall, it outlined an investment view of diversified exposure across regions, sectors, and asset classes, blending equities, commodities, income-generating strategies, and currency plays.
Identified as a key global opportunity, UBS highlighted China’s tech sector, contending that strong liquidity, retail flows, and expected 37 per cent earnings growth in 2026 should help sustain momentum for Chinese equities.
BlackRock’s 2026 Outlook also flagged AI as a transformative force, arguing that it is driving a shift from capital-light to capital-intensive growth and unlocking unprecedented investment opportunities.
“We see this creating an opportune environment for active investing,” the firm stated.
While noting the risks of a highly concentrated market dominated by a few US tech giants – creating a leveraged system vulnerable to shocks – BlackRock reaffirmed its pro-risk stance and overweight position in US stocks tied to the AI theme.
This has been BlackRock’s long-standing position, contending that the current investment wave is generating new revenue streams and potential winners across the economy.
At the same time, it also noted the risks posed by highly leveraged AI developers alongside already indebted governments, arguing that private credit and infrastructure will be key sources for financing the transformation – underweighting long-term US Treasuries.
Despite some major market players calling diversification “essential” in today’s concentrated markets, BlackRock argued that with a few mega forces driving returns, apparent diversification can actually amount to a single large directional bet.
“Markets are more concentrated, so underweighting AI has been costly and any benefit from that if the theme falters may be small,” the firm stated.
Rather than relying on traditional avenues, BlackRock argued that genuine diversification comes from “idiosyncratic exposures” in private markets and hedge funds, where returns stem from unique, independent sources of risk.
