Disruption 2.0

Barry Gill, Co-Head of Investments

Sonja Laud, Co-Head of Investments

Beyond the frontier

Who turns out to be right will depend far more on diffusion than on frontier development. – Michael Spence

Two years ago, our Disruption edition argued that investors who weren’t thinking about disruption were neglecting their duties. The disruptor-in-chief since then has, of course, been artificial intelligence.

But how exactly (and how quickly) will it all play out? Robert Solow’s famous quip that you could see the computer age everywhere but in the productivity data ultimately took the better part of two decades to resolve. Investors do not have the luxury of waiting that long and this Disruption 2.0 edition is an attempt to help navigate through it all.

We open with risk. The risk territory has moved has Ray Fuller arguing that in narrative-driven markets, concentration builds not only through position size but through shared stories, hidden correlations and common exposure to the same disruption pathways.

A macro counterpart is provided by Evan Brown and Shamaila Khan. In From geopolitical shocks to structural repricing, they show how the old debate over growth, inflation and rates now has to make room for critical minerals, a chip-technology arms race and capital flows which are all redrawing the macro map.

The great-power contest runs deeper in our featured interview. Professor Jeffrey Ding’s work on technology diffusion and the rise of great powers reframes the AI race as a contest of adoption rather than invention, and his thought-provoking views are shared in Everything, everywhere, but not all at once.

In Sparring partner, Ian McIntosh turns the lens in on ourselves and contends that the winning investment approach requires a hybrid of technological fluency, financial knowledge and creativity. It’s a playful exchange with an LLM, within which he warns against the temptation to bank AI’s productivity gains as quick, short-term cost savings and suggests we reinvest in judgement and intuition.

We also follow the money (and the megawatts) in Webs of AI debt. Matthias Dettwiler and Greggory Price show how AI has become both a capital-expenditure and balance-sheet story, pulling bond markets, private credit and structured finance into a single narrative.

Capital flooding in is one thing; turning it into cash is another. Value investing in AI narrative-driven markets sees Steve Magill warn against confusing technological inevitability with economic inevitability and probe which business models will actually convert an AI-reshaped economy into durable cash generation.

Finally, in Virtual realities: AI’s collision with the physical, the finite and the human, Olivia Muir confronts a technology sold as weightless and virtual that is proving stubbornly tangible and real – one whose hunger for power, cooling, water and land carries material, environmental and human consequences, and, with them, real return opportunities.
Across these perspectives runs a single thread around diffusion being the key to understanding where the returns, and the risks, lie.

This edition also marks a change closer to home. It is the first to be co-signed by Sonja Laud, who recently joined us as Co-Head of Investments. Sonja’s perspective is already sharpening how we frame the themes on these pages, and it is a genuine pleasure to welcome her. As ever, we hope this edition helps you find the thread through a noisy, fast-moving debate and sparks a few ideas for navigating what comes next.

Barry Gill, Co-Head of Investments, UBS Asset Management
Sonja Laud, Co-Head of Investments, UBS Asset Management

Code: S 09/26 M-006723