Analyst Says The Strong AI Outlook ‘Should Underpin Markets in 2026’

Global equity markets look set for a strong year in 2026, with UBS arguing that accelerating AI adoption, supportive economic conditions and monetary easing will play a central role in driving returns.

In a note published this week, UBS said the strong AI outlook “should underpin markets in 2026,” following upbeat guidance from NVIDIA that lifted Nasdaq futures nearly 2% ahead of the U.S. open on 20 November.

However, those gains were quickly erased with the Nasdaq closing over 2% lower and Nvidia closing the session down more than 3%.

Nevertheless, UBS said NVIDIA’s comments, without taking a single-company view, reinforce its conviction that “AI and technology will remain the key drivers of global equity markets in 2026.”

The bank highlighted that transformational innovation, coupled with “continued strong capex and growing evidence of AI monetization,” is likely to fuel further gains across AI-linked stocks next year.

But UBS added that AI-related investment opportunities extend beyond technology. It noted that rising electricity demand is boosting activity across “power generation, energy storage, and grid infrastructure,” while structural growth in longevity, companies helping people live longer and healthier lives, remains compelling.

UBS expects Federal Reserve rate cuts through the first quarter to provide another tailwind, forecasting the S&P 500 to reach 7,700 by year-end 2026.

Beyond the U.S., UBS sees opportunities in Japan, Europe and China. It rates Japanese equities as Attractive, citing rebounding corporate earnings and supportive policies.

China’s tech sector “stands out as a top global opportunity,” benefiting from innovation, policy support and robust earnings. Europe has also been upgraded to Attractive, with UBS projecting 7% earnings growth for the Euro Stoxx 50 next year.

UBS also upgraded commodities to Attractive, supported by supply constraints and rising demand, while gold should gain from lower real yields and geopolitical uncertainty. Quality bonds remain important, though UBS is cautious on riskier credit.

The bank concluded that with a clear plan and diversified portfolio, investors “can position themselves to thrive in 2026 and beyond.”