China Tech Shares and Asian–European Supply Chain Stocks: Why UBS Sees Opportunities Ahead

UBS is urging investors to broaden their artificial intelligence exposure beyond U.S. mega-cap technology stocks, arguing that opportunities across China, Asia, and Europe now offer more attractive risk-reward profiles.

In its latest CIO update, UBS said that investors should “consider hedging or diversifying their positions toward other sectors with more favorable risk-reward,” citing industrials, financials, health care, utilities, and consumer discretionary.

The bank said broadening exposure is essential as competition in U.S. software, advertising, and AI model development continues to intensify. UBS noted that hyperscalers are set to spend “over USD 650bn this year,” consuming nearly all operating cash flows, while sector leadership remains volatile at “this early stage of development.”

In contrast, UBS highlighted rising potential in China’s technology sector. Analysts said investors should “consider opportunities in China’s tech sector,” noting that Chinese hyperscalers currently invest “only a fraction” of U.S. peers but are likely to accelerate spending in upcoming earnings.

UBS expects “more visible AI progress this year,” supported by Beijing’s backing for domestic AI models and chipmaking.

The bank also pointed to opportunities across the Asian and European supply chains. UBS said supply and demand conditions in memory chips are the “tightest in 40 years,” creating tailwinds for foundries, packaging companies, networking firms, substrates, and semicap players.

Japan, it added, offers exposure to robotics and automation, while selected European semiconductor companies stand to benefit from a potential industrial recovery.

“With AI development accelerating,” UBS said, investors should diversify across sectors and regions to better capture the full scope of the technology’s global expansion.