UBS maintained a constructive outlook on equities this week, arguing in a note on Thursday that continued AI capital expenditure growth, a resilient U.S. economy, and broadening global opportunities support further gains for the S&P 500 and Nasdaq over the next six to 12 months.
The bank said its base case remains that equities can move higher despite near-term volatility from geopolitical developments, inflation concerns, and hawkish central bank signals.
Wall Street staged a comeback after the U.S.-Iran peace deal took effect and shipping began returning to the Strait of Hormuz.
On AI, UBS said hyperscalers remain committed to heavy capital expenditure plans, with first-quarter results confirming the trend.
The bank expects overall AI-related capex to rise 68% year-over-year in 2026 to around $820 billion, followed by a further 21% increase in 2027 to roughly $990 billion, with upside risks to both estimates.
Cloud growth at major platforms accelerated to 40% year-over-year in the first quarter, with $2 trillion in advance compute orders reported. UBS “therefore believes the rally in AI-linked stocks can continue to support the overall market.”
Beyond AI, UBS pointed to a supportive consumer backdrop, a pickup in the ISM Manufacturing index, and resilience in health care as drivers of broader market participation. The bank expects S&P 500 earnings per share to grow 20% in 2026 and 12% in 2027.
Globally, UBS flagged Asia and Europe as offering compelling opportunities, expecting MSCI Asia ex-Japan earnings to rise 72% this year.
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