Invest in transformational innovation

18 September 2026, 12:07 UTC Chief Investment Office GWM Investment Research

Strategic: Invest in transformational innovation Invest in transformational innovation Author: Sagar Khandelwal, Strategist, UBS Switzerland AG

• Why? 1) Innovation remains a key driver of long- term equity performance and an important feature of enduring market leaders. 2) Structural shifts in AI, energy infrastructure, and health care are expanding global profit pools and reshaping industries. 3) We expect our TRIO themes to offer durable, structural growth that we believe can persist well beyond short- term market volatility.

Diversified exposure to AI, power and resources, and longevity can capture structural growth while reducing reliance on a narrow group of market leaders. Source: Anna Evans_Unsplash

Historically, the stock market has mirrored transformational momentum could quickly shift investor attention back to structural changes. In the US, the Dow Jones Industrial monetization. Average has been variously dominated by steel, automobile, internet, and pharma companies as technological While we acknowledge the recent, high-profile, and innovations have blossomed. Our analysis also shows that coordinated calls to pace AI development on safety between 1990 and 2020, just 2.4% of US companies and concerns, we would caution against equating stronger 1.4% of non-US firms account for 100% of stock market safeguards with an end to the AI capex cycle: First, returns. AI compute demand stems from both training models and running them, a process known as inference, with Picking the right themes and the right companies at the the latter estimated to account for roughly two-thirds of forefront of those themes is therefore crucial for long- demand. Importantly, inference demand is driven primarily term equity returns. So, we identify three enduring market by real-world adoption and monetization, in our view, drivers, exposure to which should be investors' first task with the practical challenges of integrating AI into existing when building long-term stock allocations as part of a well- enterprise operations a greater constraint than current diversified portfolio. model capabilities. Training demand, by contrast, is more directly tied to the costs and expected returns of developing These Transformational Innovation Opportunities (TRIOs) are more capable models. We retain our 2027 AI industry capex AI, Power and resources, and Longevity. forecast of USD 1.2tr, a rise of 33% from our estimate of USD 900bn this year. AI The AI rally is in its fourth year, but the narrative is evolving. We think the value-creation story is broadening beyond We project the total AI addressable market to reach USD US technology, with opportunities emerging across the 3.1tr by 2030, growing at a 30% CAGR from 2026. The enabling (semiconductors, cloud), intelligence (software, sharp rise then rebound in many semiconductor companies algorithms), and application layers. Within semis and and other AI-linked parts of the market this year has hardware, our top three areas of focus are currently heightened the risk of single-stock concentration. semiconductor capital equipment, foundries, and compute names, particularly CPU-related. Looking ahead, we expect AI capex to rise further, with supply bottlenecks in key segments requiring significant Power and resources time and investment to resolve. While higher spending The intersection of AI-driven demand, energy market and strong earnings are a tailwind, any reversal in this disruption, and geopolitical risk is sharpening the focus

This report has been prepared by UBS Switzerland AG. Please see important disclaimers and disclosures at the end of the document.

Invest in transformational innovation

on energy security and infrastructure resilience. Elevated In aggregate, we estimate annual revenues in the global energy prices reinforce the importance of resolving grid longevity market could reach USD 8tr by 2030, up from USD bottlenecks and accessing essential materials. We expect 5.3tr in 2023. capital allocation to remain directed toward power, grid, and critical resources, with the current investment cycle shaped We are constructive on…