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UBS has named the return of artificial-intelligence stock leadership as its top theme, arguing that the upcoming earnings season may prove investors have been too pessimistic on the sector even as a record 82% of fund managers flag the AI trade as the most crowded in the market. "The bull market rally — one driven by broadening earnings, not multiple expansion — will continue, though the grind higher may be bumpier as risk mounts," UBS strategists led by Amr Hanafy wrote in a note. The call comes as the S&P 500 Information Technology sector has gained 23% this year, outpacing the broader index by roughly 10 percentage points. The entrenchment on both sides of the AI debate is deepening. Bank of America's latest fund manager survey showed that while 82% of respondents consider AI the most crowded trade — a record high — roughly half still say the market is not in a bubble. The divergence reflects what Reuters columnist Jamie McGeever described as a paradox: "the fog of uncertainty surrounding AI's ability to deliver sky-high profits is thickening, yet AI bulls and bears alike seem to be doubling down on their convictions." The numbers driving the divide are staggering. The Magnificent Seven hyperscalers have spent $234 billion in capex this year, yet their stocks have barely risen as investors anticipate free cash flow turning negative for the first time in at least two decades, according to Bank of America strategists. Those vast sums are flowing to semiconductor companies in what BofA calls a "generational transfer" of free cash flow from hyperscalers to chipmakers. Compute capex in the first half of the year accounted for a larger share of U.S. GDP than at any point in history, with overall tech-related investment up 30% from a year ago, according to analysts at Carlyle. All other capex fell, producing a record divergence. AI now accounts for almost all U.S. net investment. The Philadelphia Semiconductor Index has surged 75% year to date, though last month's retracement showed how quickly sentiment can shift. Volatility in stocks central to the AI story — Intel, Qualcomm, and Oracle — has exploded to historic levels recently, BCA Research data shows. For investors, the question is whether the $234 billion in hyperscaler spending translates into sustainable revenue growth for AI beneficiaries or whether the cost of compute proves too high. Bears argue that demand for the most expensive AI models will fall or shift toward cheaper open-source alternatives, most likely from China, making the return on unprecedented investment disappointing. Bulls counter that earnings for AI beneficiaries have exceeded all expectations so far, and the bar for even higher profits is being raised. The next reveal comes in the coming weeks as second-quarter earnings season begins. If AI-related companies deliver results that beat elevated expectations, UBS's call for renewed leadership may prove prescient. If they fall short, the crowded trade could unwind quickly — South Korea's KOSPI, even more concentrated in AI names than the S&P 500, has already suffered its three biggest single-day drops since the 2008 financial crisis this year alone. This article is for informational purposes only and does not constitute investment advice.
**The SEC removed a potential legal obstacle to UBS Group's crisis-resolution plans, clearing the way for a Swiss-ordered debt-to-equity conversion that could recapitalize the lender without taxpayer support.** The Securities and Exchange Commission cleared a legal path for UBS Group's crisis-resolution plans Wednesday, saying it won't recommend enforcement action against a Swiss-ordered securities exchange designed to recapitalize the bank without taxpayer funds. "The requested no-action position is based on the facts presented," the SEC's Division of Corporation Finance said in a letter to UBS dated July 8. The division said the securities exchange ordered by the Swiss Financial Market Supervisory Authority could qualify for an exemption from registration requirements under Section 3(a)(10) of the Securities Act, which covers certain transactions in connection with a court-approved reorganization. The decision removes a potential legal obstacle to UBS's crisis-resolution framework, which FINMA ordered the bank to revise in October 2024 following its emergency acquisition of Credit Suisse in March 2023. UBS purchased its then-struggling rival for $3 billion in a government-brokered deal after Credit Suisse lost a quarter of its market value and sought a $54 billion central bank loan that failed to restore investor confidence. The combined entity now holds more than $1.7 trillion in assets, making it one of the largest banks in Europe by balance sheet size. The so-called bail-in mechanism allows regulators to convert debt securities into equity to recapitalize a failing lender, avoiding the taxpayer-funded bailouts seen during the 2008 financial crisis. For UBS, which now holds a balance sheet roughly twice the size of Switzerland's annual gross domestic product, the SEC's clearance removes a key cross-border legal uncertainty that could have complicated any future resolution scenario. Without the no-action letter, UBS and its U.S. creditors faced the risk that a Swiss-ordered debt conversion could trigger litigation under U.S. securities laws. The SEC's no-action letter applies specifically to securities transactions that FINMA may order under Swiss banking law as part of a resolution proceeding. While the commission's Division of Corporation Finance said the transactions would technically constitute an offer and sale under U.S. securities laws, it determined they could proceed without full registration requirements under a specific exemption. The letter does not address whether the transactions would comply with state securities laws or other federal regulations. The decision marks a milestone in cross-border regulatory coordination for systemically important banks. Switzerland's FINMA had flagged concerns about UBS's emergency plans in late 2024, requiring the bank to revise its recovery and resolution framework to address gaps exposed by the Credit Suisse takeover. The SEC's position effectively validates that the Swiss resolution framework can operate without running afoul of U.S. securities laws — a critical issue given that UBS holds substantial U.S. assets and operates a large American wealth management business serving wealthy clients. The last time a major cross-border bank resolution tested U.S. securities law was during the 2008 financial crisis, when the Federal Reserve and Treasury coordinated with foreign regulators on the rescues of institutions including American International Group Inc. and Dexia SA. Unlike those ad-hoc interventions, the UBS framework represents a pre-planned statutory mechanism — a structure regulators have sought to develop since the Dodd-Frank Act mandated living wills for systemically important banks in 2010. The Financial Stability Board, which coordinates global resolution planning, has pushed for cross-border recognition of bail-in regimes to prevent the kind of regulatory fragmentation that could destabilize markets during a crisis. UBS is separately expanding its U.S. footprint, planning to launch everyday banking services for wealthy Americans and testing a franc-pegged stablecoin alongside other Swiss banks. The SEC's regulatory clarity on resolution planning removes one potential complication as the bank deepens its American presence and integrates the Credit Suisse wealth management operations it acquired in the emergency deal. This article is for informational purposes only and does not constitute investment advice.
**The selloff in US momentum stocks accelerated to its most violent pace since the Covid-era rotation trade, with Goldman Sachs's High Beta Momentum Factor tumbling more than 20% in five trading sessions.** Goldman Sachs's High Beta Momentum Factor plunged about 6% in a single session and more than 20% over five days, the worst such rout since the 2020 rotation out of stay-at-home stocks. "The selloff is the most violent we have seen since the shift from the Covid stay-at-home narrative to the reopening trade, but this time lacks comparable fundamental catalysts," said Guillaume Soria, a trader at Goldman Sachs. The rout was triggered by a one-two punch from the global AI supply chain. Samsung Electronics posted record operating profit in preliminary results but revenue came in slightly below buy-side expectations, sending shares down 9% in Seoul. Separately, DeepSeek announced plans to develop proprietary AI chips, intensifying concerns about hardware spending. The selling cascaded across the AI complex: the SOXL semiconductor ETF saw volume surge 35% above its 30-day average and has now fallen 50% from its all-time high set just 10 trading days ago. DRAM-related volume ran 60% above average, while the broader SMH ETF traded 30% above its norm. Despite the ferocity of the move, Goldman's trading desk said it has not yet seen panic-mode liquidation. The de-risking has been driven by systematic and factor-based flows rather than forced selling. Retail investors provided the biggest cushion, flipping to net buyers during the session with net inflows hitting the 90th percentile of the three-year lookback period. Still, with the momentum factor still up 23% year-to-date and positioning only recently retreating from historical extremes, Goldman warned that further downside remains possible in the absence of fresh catalysts. The selloff has partially reset the extreme positioning that built up during the first half. The GSPRHIMO factor's one-year percentile rank has fallen from an all-time high to the 60th percentile, according to Goldman. But the index remains well above oversold territory, leaving room for additional declines if negative news continues to accumulate. UBS's cash trading desk corroborated Goldman's assessment, describing the excess selling flow as mild relative to historical stress events. However, the bank cautioned that an orderly de-leveraging could tip into panic liquidation if the selling persists. The rotation has not been uniform. Within the S&P 500, 283 components closed higher on the day, suggesting the selling was concentrated in high-beta and AI-exposed names rather than the broad market. This dispersion aligns with Morgan Stanley strategist Michael Wilson's thesis that market leadership is broadening beyond mega-cap technology. July has historically been one of the worst months for momentum factors, and this month is on track to be the worst July on record for the GSPRHIMO. Goldman's historical data shows the factor's maximum drawdown is roughly double the current decline, meaning the selloff could deepen significantly if market leadership shifts. Soria described the current phase as potentially the later stage of the correction but warned that negative news could widen existing cracks into a more severe downturn. "If the cracks become a chasm and market leadership shifts, this could evolve into a deeper correction," he said. This article is for informational purposes only and does not constitute investment advice.
**UBS lowered its oil price forecasts for this year and next as the reopening of the Strait of Hormuz and resumption of Iranian exports signaled a supply-driven repricing in crude markets.** UBS on Thursday reduced its 2026 and 2027 oil price forecasts as shipping through the Strait of Hormuz recovered to about 50% of pre-conflict levels and Iranian crude exports regained momentum following an easing of the U.S. blockade, the bank said in a note. "The recovery in Hormuz transit volumes and the resumption of Iranian exports represent a material shift in the supply outlook that we had not fully incorporated into our prior estimates," the UBS analyst team wrote, though the bank did not disclose the specific new price targets or the magnitude of the reduction. Brent crude slipped to $72 a barrel as traders weighed the implications of improving supply flows against lingering geopolitical risks. The UAE's oil exports jumped 30% in June to 3.9 million barrels per day, nearing prewar highs, as the country bypassed the Strait of Hormuz via pipeline and tanker routes, according to shipping data. The recovery follows a dramatic collapse in late June, when Hormuz transit fell to just four vessels on June 29 from 70 earlier that week after IRGC strikes on four U.S. bases reversed a post-MOU shipping recovery. The supply-side repricing carries broad implications. Lower crude costs could ease inflation pressures across importing economies — particularly in India, where the rupee and consumer prices are sensitive to oil swings — while squeezing revenues for OPEC producers already managing output restraint. The forecast revision from a major bank like UBS may trigger further downgrades across the sell side if the shipping recovery accelerates, potentially pushing Brent below the $70 threshold that many fiscal budgets in the Gulf are calibrated against. **Supply Recovery vs. Geopolitical Risk** The fundamental question for traders is whether the Hormuz recovery is durable. While transit volumes have rebounded to half of pre-conflict levels, the route remains vulnerable to further disruption. The June 29 collapse — triggered by IRGC strikes on U.S. bases — demonstrated how quickly shipping can be paralyzed. Efforts to fully restore commercial shipping continue to face major obstacles, according to industry sources. Iranian crude exports, which had been suppressed by the U.S. blockade, are now regaining momentum. The combination of resumed Iranian supply and recovering Hormuz flows adds roughly 1 million to 2 million barrels per day of potential supply to a market that the International Energy Agency had projected would remain tightly balanced through the second half of 2026. **What Comes Next** The direction of oil prices now hinges on two variables: the pace of Hormuz recovery and the trajectory of U.S.-Iran diplomatic talks in Doha. If shipping normalizes fully and Iranian exports return to pre-sanctions levels, Brent could test the low $60s, according to some traders. Conversely, any renewed escalation in the Strait would reverse the supply gains almost overnight, reintroducing the risk premium that had kept prices elevated through mid-2026. This article is for informational purposes only and does not constitute investment advice.
Gold rose above $4,000 an ounce, up 1.6% to $4,071.04, after US private payrolls missed estimates in June, the softest hiring print in four months. "The pace of hiring is telling a story of both supply and demand," Dr. Nela Richardson, chief economist at ADP, said after the firm's National Employment Report showed private-sector hiring rose by 98,000 jobs, below the 110,000 consensus. The ADP print landed hours after Fed Chair Kevin Warsh, speaking at the European Central Bank's forum in Sintra, said inflation risks have eased in recent weeks and energy prices have fallen "quite substantially" since the US-Iran accord. The Dollar Index traded near 101, up 3% year to date, as a hawkish Fed stance had weighed on gold through the second quarter — the metal's worst three-month period since 2013, with a 16% decline. The breakout above $4,000 signals a potential reversal after gold flashed a death cross in late June, when its 50-day moving average fell below the 200-day. UBS expects bullion to climb to roughly $5,200 over the next 12 months, citing steady central bank buying — Poland added 18 metric tons in May and China added 10 — while Goldman Sachs set a $4,900 year-end target. The move also strengthened gold's correlation with Bitcoin, as both non-yielding assets benefited from shifting rate expectations. Bitcoin tracked gold higher on Wednesday, with traders citing the same macro catalyst: a softer labor market increases the probability of Fed easing, which reduces the opportunity cost of holding assets that pay no yield. Gold had fallen 27% from its January record above $5,600, a decline that Jeff deGraaf, chairman of Renaissance Macro Research, said confirms the idea that gold was in a bubble at the end of 2025. The World Gold Council, in its mid-year outlook, noted that "convergence of global interest rates to higher levels would also raise the opportunity costs of gold." Despite the quarter's rout, central banks remain net buyers. A World Gold Council survey found a record 45% of 76 central banks polled between February and May expect to increase their gold reserves over the next 12 months. "Structurally, EM central bank diversification — following the 2022 freezing of Russia's reserves — remains the anchor of our $4,900/oz end 2026 forecast," said Samantha Dart, co-head of global commodities research at Goldman Sachs. This article is for informational purposes only and does not constitute investment advice.
**Markets are underestimating the risk of a Federal Reserve rate increase as soon as this month, with Chair Kevin Warsh adopting a more preemptive approach to inflation, according to UBS Group AG.** Investors are underpricing the chance the Federal Reserve will raise interest rates as soon as July, with Chair Kevin Warsh signaling a more aggressive posture on inflation, according to UBS Group AG. "The market is assigning roughly a 30% probability to a July hike, which we view as too low given the chair's stated willingness to act preemptively," Frank Flight, macro strategy head at UBS, said in a note. UBS's baseline scenario calls for two rate increases this year — in September and December — but Flight said the risks are tilted toward an earlier move. The July employment report carries upside surprise risk that could further strengthen the case for tightening, he added. A July hike would mark a hawkish surprise that could trigger a broad market repricing, strengthening the dollar while weighing on risk assets from equities to cryptocurrencies. The Fed's next policy meeting is scheduled for July 28-29. Warsh, who took the helm at the central bank earlier this year, used his first major public address Wednesday to emphasize the Fed's independence and its commitment to bringing down inflation, effectively pushing back against President Donald Trump's calls for rate cuts. The remarks align with the preemptive approach Flight highlighted. **Cross-asset implications** A sooner-than-expected rate increase would likely push short-term Treasury yields higher, with the 2-year note particularly sensitive to changes in the rate path. The dollar would probably strengthen against major peers, while equity markets — especially rate-sensitive sectors such as real estate and utilities — could face headwinds. The S&P 500 has historically declined an average of 1.2% in the week following a hawkish Fed surprise, according to data compiled by Bloomberg. **Employment data in focus** The July jobs report, scheduled for release Aug. 7, will be a key input for the Fed's decision. Nonfarm payrolls have averaged roughly 180,000 per month over the past three months, and a print significantly above that level could solidify the case for a July move. The unemployment rate currently stands near historic lows, giving the Fed room to focus on inflation without concern about damaging the labor market. If the data supports a July hike, the probability could quickly reprice toward 50% or higher, Flight said. If not, the Fed retains the option to wait until September, keeping the two-hike baseline intact. The key variable is whether Warsh's preemptive rhetoric translates into action at the next meeting. *This article is for informational purposes only and does not constitute investment advice.*
UBS said it remains positive on China AI technology hardware stocks for the remainder of 2026, citing strong revenue and earnings growth that will continue to support the sector's performance. "Strong revenue and earnings growth will continue to support the performance of AI technology companies," Wang Zonghao, Head of China Equity Strategy Research at UBS, said in a note. He favors leading companies in key AI sub-sectors including optical modules, memory, GPUs, copper clad laminates and semiconductor equipment. Although there are signs the upcycle in China AI technology is gradually approaching its peak, next year is expected to be a critical period to test whether related companies and the industry can truly deliver on their AI promises, Wang said. As capacity expansion continues and growth slows next year, market volatility may increase, with industry leaders that further penetrate the global supply chain likely to outperform. The bullish call comes as China's AI hardware sector draws increasing investor attention amid Beijing's push to narrow the technology gap with the U.S. In a separate development, CLSA raised its price target on GIGADEVICE (03986.HK) to HKD 1,254 from a prior level, sending the stock to a record high with a gain of more than 13%. GIGADEVICE, a niche memory chipmaker, has been a standout beneficiary of the AI-driven demand surge for specialized memory solutions. The endorsement from UBS, one of the largest global investment banks, is expected to drive institutional capital flows into China AI hardware names. The note signals that UBS sees sustained fundamental momentum in the sector despite the approaching peak of the current upcycle. Investors will watch upcoming earnings reports from key sub-sector leaders to gauge whether revenue growth can keep pace with elevated expectations. This article is for informational purposes only and does not constitute investment advice.