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UBS calls for a commodity upcycle driven by electrification and AI spending

UBS says commodities could both deliver a structural return and help protect portfolios if higher inflation expectations pressure stocks and bonds.

Reported · Written up by our desk · Energy Transition

One day after commodities strategist Jeff Currie urged investors to position for the next leg of a commodities rally, UBS strategist Sagar Khandelwal said a broader commodity upcycle is taking shape, citing electrification and rising power demand as key tailwinds.

Khandelwal pointed to artificial-intelligence infrastructure spending and persistent supply constraints, along with years of underinvestment, as factors that could support a sustained period of strength across hard assets.

In a note summarized by OilPrice, UBS argued commodities can play a defensive role, potentially offering returns and portfolio protection in scenarios where renewed inflation expectations weigh on traditional assets like equities and bonds.

UBS added that it favors maintaining diversified exposure across precious metals, energy, industrial metals, and agriculture, and suggested an actively managed approach as leadership shifts across commodity markets, with gold supported by improved US inflation concerns and reduced expectations for near-term Federal Reserve rate hikes.

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