Swiss Blue Chips Surge as AI Rally Fades and Borrowing Costs Rise

Swiss blue chips are outperforming euro-area counterparts by nearly 8 percentage points so far in October, the biggest differential since March 2020.

The Swiss Market Index has risen 4.6% in October, while the Euro Stoxx 50 has fallen 3.2%. Bloomberg attributed the gap to 3 forces that are driving investors to reduce risk in Europe.

• Higher borrowing costs
• Growing doubts about AI investments
• Political uncertainty in France and Spain

3 Large Stocks Driving Swiss Index's Gain

European investors have favored companies with strong profitability and robust balance sheets, making them less sensitive to rising borrowing costs. Bloomberg identified the SMI as a major beneficiary of this shift, with its 3 biggest stocks generating all of the index's October gains.

Roche, the pharmaceutical company, has advanced 12% in October, while competitor Novartis rose 6.7%. Nestlé, the food giant, gained 10%.

Combined, these 3 stocks account for nearly half of the SMI's market value. Buying the index today is essentially a bet on those 3 names.

The Swiss rally coincided with a global selloff in AI shares. CNBC reported that 20 leading AI and semiconductor stocks lost more than $1 trillion in value between October 12 and 15.

Investors worried that higher borrowing costs could weigh on AI spending. Global corporate bond spreads have since widened to their highest since May 2025.

Damian Burkhardt from EFG Asset Management linked the Swiss gains to the retreat from AI.

“Investors like the defensiveness of Swiss stocks and are actively looking for alternatives to the crowded AI trades. Healthcare was the funding sector for the AI trade, and that is reversing now,” he said.

Bank of America’s global fund manager survey shows how crowded that trade was before the selloff.

Managers polled from October 2 to 8 held their largest tech allocation since August 2020. A separate European survey by Bank of America placed Switzerland in a tie for second place at a net 16%, behind Spain’s net 28%.

The recent rally has made Swiss shares more expensive, raising questions about how far it can continue.