Ulrike Hoffmann-Burchardi, Chief Investment Officer for UBS Wealth Management Americas and Global Head of Equities, stated that the threat artificial intelligence poses to software-based businesses should prompt investors to shift their focus from technology firms to companies deeply involved in the physical economy, such as mining corporations, power producers, and industrial enterprises.

Speaking on the sidelines of a financial industry conference in Miami Beach on Tuesday, she indicated that her team is reallocating investment portfolios from a "digital economy" focus toward the "physical economy." This strategy involves purchasing stocks in equipment manufacturers, electricity generation companies, and resource-focused mining firms—businesses that build the tangible infrastructure essential for the modern economy.

This reallocation comes at the expense of technology companies, which have been favored during the AI trading surge over the past three years and have driven stock market gains. Hoffmann-Burchardi noted that certain segments within the tech sector are vulnerable, particularly software companies, along with service providers reliant on software, such as legal and financial services firms.

Although the CIO anticipates that AI will disrupt numerous industries, she believes that equity markets can still advance amid a strong economic backdrop and accommodative monetary policy.

"The macroeconomic environment is very, very favorable—however, I think the AI component will become more complex," she remarked. "In recent years, AI has acted like a rising tide lifting all boats; but this year, it will increasingly become a key differentiator between winners and losers. The entire digital economy could be reshaped by AI, which poses a risk to broad segments of the stock market."

UBS has downgraded its rating on the information technology and communication services sectors within the S&P 500 index, opting instead to invest in the "physical components" of the U.S. benchmark index.

Concurrently, the tech-led stock market rally has largely stalled since late October. Since the S&P 500 reached a record high on October 28, technology stocks within the index have declined by 8.6%. As investors rotate from winning sectors into previously underperforming areas, energy and materials companies have gained at least 20% over the same period.