Here’s something you don’t hear often in 2026: a major bank calling global trade “surprisingly stable.” UBS, in a series of research notes released this month, argues that despite the tariff wars and geopolitical chess matches that have defined the last few years, the underlying structure of international commerce hasn’t fractured the way many predicted. The reason, according to UBS, is artificial intelligence.

The bank raised its year-end S&P 500 target to 7,900 from 7,500 as of May 22, citing surging demand for data centers and semiconductors alongside resilient consumer spending.

The bull case, in four parts

UBS identifies four pillars holding up the current bull market: resilient economic recovery, robust profit growth, a supportive Federal Reserve, and the ongoing rollout of AI across industries. UBS sees all four operating simultaneously, which is the kind of alignment that tends to keep equity markets running hot.

The AI investment cycle has broadened well beyond the usual suspects. Earlier phases concentrated on a handful of chipmakers and cloud providers. Now, UBS sees capital flowing into infrastructure buildouts, enterprise applications, and hardware adoption across sectors.

The bank projects low-teens earnings growth across selected AI-adjacent sectors, which sounds modest until you remember that many of these companies were struggling to hit mid-single-digit growth before the AI cycle kicked in.

China’s quiet transformation

Perhaps the most counterintuitive finding in UBS’s analysis involves China. AI-related shifts have changed the composition of China’s exports, pushing the country’s trade profile toward higher-value technological components. China isn’t just selling cheap goods anymore. It’s climbing the value chain in AI-related hardware and components, and that shift is actually contributing to trade stability rather than undermining it.

What’s fueling the optimism

UBS’s overarching view combines AI advancements with fiscal stimuli and accommodating monetary policies as the cocktail keeping markets elevated. The raised S&P 500 target to 7,900 comes at a point when some market participants are getting nervous about valuations normalizing. UBS acknowledges this, recommending selective investment strategies rather than broad market exposure.

Data center demand continues to be a core driver. The buildout required to support AI workloads is creating a capital expenditure cycle that benefits construction firms, power utilities, cooling technology companies, and real estate investment trusts alongside the more obvious semiconductor and cloud computing plays.

What this means for investors

The UBS thesis presents a favorable environment for sectors tied to AI infrastructure, semiconductors, and consumer technology. UBS recommends selectivity, implying that sector and stock selection matter more than broad market exposure as valuations begin to normalize.

The global trade stability angle adds another dimension. If UBS is right that AI is creating durable trade linkages, particularly with China, then companies with diversified international supply chains may be less risky than the decoupling narrative suggests.