Breaking news! UBS unusually bullish: China’s market may have already overcorrected, and high-quality AI stocks are now presenting a valuation window for investment.

Ask AI · How can China’s AI industry commercialization drive valuation repair?

On March 31, UBS Wealth Management’s Office of the Chief Investment Officer (CIO) released an institutional view. It said that the current adjustment in the China market may already show signs of being excessive. For investors, this creates an opportunity to increase holdings of high-quality China AI stocks at lower valuations.

In its view, UBS highlighted that the China internet sector’s 12-month forward P/E is currently around 13x, having fallen back to the low level before DeepSeek was released. This valuation level is seriously out of sync with the intensity of investment in China’s AI industry over the past year and the results of commercial monetization. In fact, after more than a year of deep cultivation, China’s AI industry has moved from concept hype into a scale-driven monetization stage. The AI business contributions of leading companies have continued to stand out. Take Alibaba as an example: in its fiscal 2026 Q3, AI-related product revenue has achieved triple-digit year-over-year growth for the tenth consecutive quarter. Alibaba Cloud’s AI business’ external monetization revenue has already surpassed 100 billion yuan, Pingtouge developed and produced its own GPU chips at scale, and it has formed a full-stack layout of “chips + cloud + models + applications.” Yet such real performance growth has not been fully reflected in today’s low valuations.

Strong profit-side expectations further support UBS’s view that the adjustment is excessive. UBS Wealth Management expects that in 2026, earnings per share (EPS) growth for the MSCI China Index will be about 13%, with profit growth for the technology sector expected to reach 20% to 25%. This forecast aligns with consensus from other major institutions. Goldman Sachs previously predicted that the MSCI China Index would rise 20% in 2026; earnings growth would accelerate from 4% in 2025 to 14%, with AI development among the core supporting factors. JPMorgan Chase also noted that as revenue increases and cost savings come from AI applications, there is an upside risk to the MSCI China Index’s earnings expectations—especially given that profit expectations for weightier sectors such as the internet have substantial room for upward revision. Such clear earnings growth expectations stand in stark contrast to the market’s current low valuations, implying that there is significant valuation-repair space for the sector.

Sustained policy efforts also lay a solid foundation for the development of China’s AI industry, and have become an important support for UBS’s optimism about high-quality AI stocks. Since 2026, AI-related policies have been rolled out intensively. From top-level design to concrete implementation, a complete support system has taken shape: during the National Two Sessions, “Artificial Intelligence+” was explicitly proposed for deepening, to promote large-scale adoption of intelligent agents, strengthen AI infrastructure construction, improve data factor mechanisms and open-source ecosystems, and push AI commercialization in key industries such as manufacturing and healthcare. In March, the State Council and related ministries further issued a cluster of policies: to accelerate the construction of a nationwide integrated computing power network, promote AI scenario-based applications, define an AI regulatory framework, and increase efforts to train AI talent—providing comprehensive backing for AI industry development. This sustained, pragmatic policy support not only accelerates the deployment of AI technology, but also reduces uncertainty in industry development, offering solid protection for the long-term growth of high-quality AI companies.

Movements in the capital side also indirectly confirm the excessiveness of the market adjustment. Data shows that since March, foreign capital has increased positions against the trend during the market adjustment process, focusing on core tracks such as AI compute power and semiconductors. AI-related names such as NVIDIA (sp?)? — No, actually “中际旭创, 新易盛, 工业富联” are cited. Specifically, companies including InnoLight? No. As stated: “中际旭创、新易盛、工业富联等AI相关标的成为北向资金重点买入对象.” As highly market-sensitive “smart money,” foreign capital’s buy-the-dip positioning also echoes UBS’s view of “increasing holdings of high-quality AI stocks.”

UBS further analyzed and pointed out that the current market adjustment stems more from short-term disruptions in sentiment rather than substantive deterioration in fundamentals. As market sentiment gradually recovers, together with ongoing推进 AI commercialization and monetization, policy support that does not weaken, and steady delivery of earnings growth, the profitability, valuations, and positioning of China’s AI and technology sectors are expected to gradually rebound—forming a virtuous cycle of “earnings improvement → valuation repair → capital returning.”

It should be made clear that UBS emphasizes “increasing holdings of high-quality AI stocks,” whose core focus is on leading companies with core technology barriers, strong commercialization capabilities, and stable cash flows—not a blind allocation to the entire AI sector. There is still some uncertainty in the current market, and internal differentiation within the sector will continue to intensify. Companies that lack core technology and rely only on concept hype will find it difficult to benefit from the upside of valuation repair.

Overall, UBS’s view provides a clear reference perspective for the current bewildered market. The market’s short-term adjustment in China is precisely creating a window for investors to allocate to high-quality AI assets at reasonable prices. As the AI industry continues to deepen, policy support keeps being strengthened, and earnings expectations are gradually realized, the undervalued high-quality China AI stocks are expected to gradually return to their fair value, becoming one of the core driving forces behind future market recovery.