Investing.com -- UBS revealed on Friday that it has reduced its combined semiconductor and hardware weighting in its AI investment strategy to around 61% from roughly 76%, taking profits following a Micron-driven rally that lifted the SOXX index 4% in a single session and 10% across June.

In a note from its equity strategy team, UBS said profit-taking was concentrated in small- and mid-cap AI supply chain names across optics, baseboard management controllers, multilayer ceramic capacitors, substrates, cooling, advanced packaging and analog components.

Despite the reduction, UBS said its strategy "still retains an overweight of roughly 20-25 percentage points" relative to the Nasdaq 100's approximately 42% AI semiconductor and hardware exposure.

In parallel, UBS increased exposure to more defensive parts of the AI ecosystem to around 20% from less than 1% in early June, focusing on data center operators, telcos and select payments names with "prudent balance sheets and stable dividend profiles."

UBS said "the medium-term AI demand story remains intact, supported by cloud acceleration and agentic AI workloads," but flagged the risk that a significant decline in hyperscaler stocks "may pressure management to reduce capex commitments in the future."

The bank noted Big 5 hyperscaler shares have fallen an average of 20% in June alone.

Within semiconductors, UBS said it continues to favor foundry exposure such as TSMC, semicaps including Applied Materials, memory names such as SK Hynix and select compute exposure.

The bank maintained a significant underweight to the Magnificent Seven, with a combined portfolio weight of approximately 18%.