UBS Equities-US Equity Strategy _The Theme-ometer AI remains on top as c...-117727384

ab11 September 2025Global ResearchUS Equity StrategyThe Theme-ometer: AI remains on top as capex questions 'bubble'A market of themesWe leverage our REVS framework on a suite of thematic equity stock lists to objectively assess which themes should be more or less favored. REVS is our quantamental stock selection framework. Our philosophy is that stock prices are impacted by the macroeconomic regime (R), the operating environment for earnings (E), the market assessment of valuations (V), and sentiment (S). We have built models that give us a comprehensive tactical framework (2-6 months). Each model backtests well and they work well together. We have scores on global stocks and can aggregate them to countries, sectors, and in this note, we assess equity themes as well as indices, sectors and industry groups globally.Thematic rankings
AI Software Pioneers are now the preferred AI-related basket according to our scorecard, improving slightly month-over-month as AI-Exposed Semis move down the list. While questions continue to 'bubble' about the return on AI capex spend, our REVS framework continues to rank AI peripherals as the top themes in our scorecard. Valuations and crowding remain high but earnings momentum and the late cycle growth regime are still supportive. Top scoring stocks within the AI related themes include Mongo DB, Meta, Mastec, Primoris, and Snowflake.
Pharmaceuticals thematic basket sentiment score continues to improve. Negative revisions in US Pharma & Biotech have slowed considerably and are now slightly positive while valuations have been under pressure and look attractive.
EU Defense Spending has stopped sliding down our scorecard. Earnings revisions had previously stalled which is often a problem when stocks are expensive and crowded. Top scoring stocks are Thales, BAE and Rheinmetall.
EU Electrification and EU Renewables continue to climb up our thematic scorecard. For renewables, this is a reversal of a multi-year downgrade cycle but where the causes of that (cost inflation, rising rates, low asset turnover) are all abating.
EU Consumer themes are at the bottom of our scorecard, though the scores are not materially negative. This includes EU Luxury Goods and UK Homebuilders. Earnings revisions stabilizing is key for these themes to become appealing again.Regions and Sectors
Asia region remains strong in our rankings as Japan screens as the strongest DM country. TWSE (Taiwan), HSI (Hang Seng) and KOSPI2 (South Korea) remain high on the list currently. This reflects more positive regime, valuation and crowding signals. If earnings revisions were to stabilize or tick higher, we would expect to see material outperformance.
Europe ranks below the US due to wide score dispersion. Tariffs, currency and Chinese demand weakness/competition continue to negatively impact half the European market. However, Europe's top sectors (Telecoms, Utilities, Financials and Industrials) and EU Listed Eurozone Exposureare as high scoring