UBS Equities-US Equity Strategy _The Theme-ometer Defense and Infrastruc...-118843315

ab13 November 2025Global ResearchUS Equity StrategyThe Theme-ometer: Defense and InfrastructureA 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), earnings (E), 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 and sectors, and in this note, we assess equity themes as well as indices, sectors and industry groups globally.Thematic rankings
Defense Primes+ has climbed to the top of our thematic scorecard, supported by broad-based improvements across both scores and constituents. Regime and earnings scores, previously a drag on the theme, have strengthened significantly. Sentiment scores also improved, building on an already solid foundation. Importantly, these gains were widespread across the space rather than concentrated in a handful of names.
US Infrastructure appears attractive and aligns with our Global Outlook view favoring a US Investment basket vs Consumer basket. The setup for next year suggests investment spending will likely outpace a still fragile consumer backdrop. Productivity gains and policy incentives—particularly those stemming from the OBBB (One Big Beautiful Bill)—should continue to support capital expenditure, while labor market softness weighs on consumer sentiment. Overall, US Infrastructure is positioned to benefit from sustained positive tailwinds.
AI themes remain a buy, though they rank lower on our scorecard. Within the space, AI Robotics and AI Power have emerged as top scorers, while sentiment for AI Software Pioneers declined over the past month. Peripheral AI baskets continue to show positive momentum in the REVS scorecard, but leadership is less concentrated at the top. Technology PMIs have stabilized since September, providing a more supportive backdrop. Among AI-related themes, top-scoring stocks include NRG Energy Inc., Primoris Services Corp., and Nextera Energy Inc.
EU Electrification and EU Renewables remain atop our thematic scorecard. EU Renewables is the second highest scoring theme and rank well across the four pillars of the REVS framework. Top scoring stocks include Iberdrola SA, Solaria Energia y Medio Ambi, and Siemens Energy AG.
Speculative Growth continues to score positively within our REVS framework, but risks are mounting. Valuations remain extremely stretched, and while regime, earnings, and sentiment scores are supportive for now, this strength may not be durable. Elevated valuations can persist only as long as earnings revisions and crowding trends stay positive. Any stall in earnings momentum could quickly bring the valuation overhang back into focus.Sectors
In the