Commenting on its portfolio positioning, the wealth manager expressed concern about the dominance of AI companies in the US indices.
This has previously been flagged by Morningstar last month who warned investors are likely more exposed to the sector than they realise thanks to exposure to companies like Meta and Amazon which they may not initially consider as an ‘AI’ holding.
Scott Haslem, chief investment officer at LGT Wealth, said the wealth manager has opted to stay neutral on US equities for this reason.
“Even those sold on the AI revolution should ensure portfolios are not over-exposed,” he said.
“The performance of markets and economies as we traverse 2026 is likely to be intimately impacted by the durability of the AI thematic, from the performance of companies to the impact on economic growth of its unfolding capex pipeline. Judging the AI thematic’s path with confidence is near impossible.”
While markets in 2025 have been driven by this AI euphoria, the wealth manager said 2026 could see more ‘measured’ returns. 2025 has seen the S&P 500 return 16.3 per cent since the start of the year while the tech-heavy Nasdaq index has returned 21.4 per cent.
He said US and China are both competing for AI ‘supremacy’ and have invested heavily in the sector so LGT Wealth is expecting both countries to maintain strong state support for AI investment in the medium term to maintain this dominance.
“[This is] a dynamic which could provide further fuel to the AI ‘bubble’ and potentially sustain it for longer than might appear rational.”
A secondary asset affected by AI would be private infrastructure and real estate which is expected to grow in prominence in portfolios thanks to its exposure to digitisation and decarbonisation thematics.
Meanwhile, UBS Global Wealth Management said a potential disappointment in AI progress or adoption would be a key risk next year. The firm’s bear case would be stalled AI investment or contracts due to disappointing monetisation, technical setbacks or obsolescence while corporate caution would lead to reduced capex and slower AI adoption.
On the flip side, a bull scenario would see monetisation exceed expectations, driving productivity and corporate profits.
“We believe current investor enthusiasm for AI is justified by strong capital spending, innovation, and adoption. But valuations are high, markets have rallied strongly, and no investment boom has ever seen capital spending perfectly match future demand.
“The AI rally may face periods in 2026 when investors fear excess investment, bottlenecks, or obsolescence. Broader risks could emerge if refinancing dries up, triggering defaults or threatening financial stability,” the firm said in its Year End 2026 report.
Continuing the theme, Evidentia said it is also neutral on developed market large-cap equities but said this is more a result of Trump administration concerns than AI.
“AI enthusiasm may be driving lofty valuations, but the technology’s transformative impact appears genuine. Despite short-term disruptions in the labour market, AI could be paving the way for long-term productivity and economic growth.
“The Trump Administration’s tariff policies are a headwind for growth, but the impacts will be manageable. Economic indicators have moderated year to date, but fears of a severe growth have diminished.”
