UBS CEO Says The Ongoing AI Pullback Is Healthy. But Another Risk Could Be the Next Big Threat for Investors

UBS Chief Executive Sergio Ermotti believes the recent cooling in artificial intelligence-related stocks is not a reason for investors to panic, but geopolitical uncertainty could be, even as the Swiss banking giant posted stronger-than-expected second-quarter results and unveiled a new multibillion-dollar share buyback program.

UBS on Wednesday reported net profit attributable to shareholders of $2.8 billion for the second quarter, matching analyst expectations compiled by LSEG. Pre-tax profit climbed 64% from a year earlier to $3.6 billion, reflecting broad-based strength across the bank's investment banking, wealth management and capital markets businesses. Speaking to CNBC's Squawk Box Europe, Ermotti said UBS continues to see strong client activity despite an uncertain macroeconomic backdrop.

He described the firm's investment banking pipeline as "very good," highlighting healthy momentum in mergers and acquisitions, equity markets, debt capital markets and leveraged finance. He also pointed to a robust market for initial public offerings, noting UBS played a role in SpaceX's blockbuster stock market debut.

The bank also announced a new $3 billion share repurchase program, beginning with a $1 billion buyback over the next three months, a move that helped lift UBS shares roughly 2.5% in early trading.

While investors remain focused on the explosive growth of artificial intelligence companies, Ermotti suggested recent weakness in the sector represents a normal market adjustment rather than the beginning of a broader collapse. "Clearly the ongoing volatility we see coming from the geopolitical front may create some kind of temporary headwinds," Ermotti told CNBC.

"But the momentum is good. We are well-positioned to capture the benefits of that." His comments come after months of extraordinary gains in AI-related companies fueled by investor enthusiasm for data centers, semiconductor manufacturers and cloud infrastructure providers. That rapid rally also led to concerns about lofty valuations and heavy concentration in a handful of technology stocks.

According to Ermotti, some moderation was inevitable. "Given the pace and scope of the increasing market caps and concentration over the last three-to-four months, a correction was to be expected," he said.

Rather than viewing the pullback as a warning sign, the UBS chief said it represents a healthier environment for long-term investors. "It's only healthy to see it. We advise clients in that context always to really diversify," Ermotti said.

Ermotti stressed that AI's influence will extend well beyond today's market leaders. He said artificial intelligence and the infrastructure supporting it will remain a "big factor" for financial markets, but the technology's economic benefits are expected to spread across many industries rather than remaining concentrated in chipmakers and mega-cap technology firms. "This is a huge opportunity that we can give to our clients to diversify and invest for the future," he said.