UOB Group Stays Overweight on U.S. Equities, Favours Quality Growth and AI Leaders

UOB Group remains Overweight on U.S. equities, maintaining its preference for quality growth and artificial intelligence (AI) stocks, while encouraging investors to broaden exposure beyond the market’s biggest technology names.

In a recent strategy note, the bank continues to favour “quality AI/growth stocks,” but advised diversification into what it calls the “Next 20” companies following the dominance of the so-called Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Tesla and NVIDIA) within the S&P 500.

“With no major negative planned event (like a Liberation Day) on the horizon, the Fed in an easing cycle, and
historical precedence for the best returns slated for the next 6 months, we upgrade equities to Overweight,” wrote the firm.

UOB added that while the large-cap technology firms remain central to the AI investment theme, the next wave of beneficiaries is likely to emerge from companies enabling or leveraging AI infrastructure, digital transformation, and productivity gains. 

That could include software firms, semiconductor producers and select industrials benefiting from automation trends.

“We recommend looking into other large caps (Next 20 largest stocks) and global equities like China. Existing positions in US Mega-caps remain justified, but initiating new exposure offers a less compelling risk-reward profile at current levels,” UOB analysts commented.

The group’s upbeat view on U.S. equities contrasts with its more cautious stance elsewhere. 

UOB stated that it is Neutral on European equities, citing a “tepid growth outlook” but identifying potential in banks, industrials, and defence stocks amid looser monetary and fiscal conditions. 

It also maintained a Neutral view on Japan, favouring quality firms with strong brands and intellectual property, as well as those benefiting from ongoing corporate reforms.

Elsewhere, UOB wrote that it remains Overweight on emerging Asia, expecting a weaker U.S. dollar and prospective Federal Reserve rate cuts to spur foreign inflows into the region, where valuations remain “relatively undemanding.”