Will Hobbs, Chief Investment Officer at Brooks Macdonald, believes that the UK equity market is an underappreciated opportunity for investors looking to capitalize on artificial intelligence (AI).
While hedge funds and other institutional investors have largely shunned UK equities in 2026, leading to a net 37% underweight position among investors (the most negative since August 2020), Hobbs highlights the potential for AI development to boost productivity and growth within the UK's economy.
UK equities currently trade at a roughly 35% discount to the MSCI World Index. Although the FTSE 350 has only 1.2% exposure to technology companies, Hobbs sees value in traditional UK sectors like healthcare, which could significantly benefit from AI through advancements like cost-savings in drug discovery. This perspective contrasts with the prevailing sentiment that has seen global investors become more bearish on UK equities, as evidenced by almost £20 billion in net outflows from domestic institutional investors in Q1.
Despite the UK's perceived lack of direct AI exposure, investment in UK AI companies reached a record £4.56 billion in Q2 2026, accounting for 57% of total capital invested in UK equity deals. This record investment suggests a burgeoning domestic AI ecosystem that could drive future growth in unexpected areas of the UK market. Brooks Macdonald maintains an overweight position in UK equities, citing the combination of future AI gains and present low valuations.
Many major investment banks, however, remain cautious on UK equities; Barclays prefers eurozone equities, JPMorgan holds a neutral stance, and Citigroup recently downgraded the market to underweight. Hobbs's view suggests a contrarian stance, where the UK market's cyclical sectors like financials, energy, and materials, could offer resilience and diversification distinct from the current AI-driven global market.
