UBS has warned of greater market volatility next year, citing risks ranging from weaker-than-expected artificial intelligence revenue to geopolitical tensions, but the Swiss investment bank remains bullish about Chinese technology shares and gold.
UBS identified five major market risks for next year: economic weakness, a resurgence of inflation, government debts, renewed US-China conflicts, and disappointing returns from AI after three years of heavy investment.
“One point that we can be very sure of is that the volatility will be bigger,” said Hu Yifan, regional chief investment officer at UBS Global Wealth Management, at a press conference on Thursday. While global investments in AI would continue, markets were increasingly questioning how much profit such spending could generate, Hu added.
Since last year, some US market heavyweights like Michael Burry have warned of a potential AI bubble. Nvidia’s slumping shares deepened the concerns.
UBS, however, believed the AI boom differed from the dot-com era. Eva Lee Chi-wing, head of Greater China equities at UBS, said global tech giants were now better positioned to withstand shocks, given their strong cash flows and limited reliance on debt to fund investments.
With Chinese tech companies leading in AI applications, Lee estimated earnings growth of up to 37 per cent next year, adding that Chinese tech stocks “are still not expensive”.
