UBS has reiterated its overweight stance on European pharmaceuticals, framing the sector as a more resilient home for capital than artificial intelligence at a point when the wider market is slowing.
The bank argued that the investment case now rests on more than defensive quality
It pointed to improving earnings revisions, low relative valuations and lighter ownership after the sector became a source of funds earlier this year. European pharma has risen more than 5% since mid-June, making it the best-performing sector over that period. UBS described the shift as the “what if not AI” trade with better timing.
The bank said AI enablers remained attractive but were becoming more two-sided, as data-centre execution and physical bottlenecks could slow the pace of further upgrades. Weight-loss drugs are the strongest near-term catalyst, according to the note. The GLP-1 theme, which covers treatments such as Novo Nordisk’s (NYSE:NVO) Wegovy, now tops UBS’s ranking of investment themes in both the United States and Europe.