Key Points:
- Two European AI-related stock baskets have outperformed, rising to 22% since early April.
- These tech gainers account for more than two-thirds of the positive returns in European equities.
- The tech boom defies a broader Eurozone economic contraction, which recently hit a 2.5-year low.
- European tech shares remain cheaper than US peers, trading at 28 times earnings versus the Nasdaq’s 35.
A quiet but powerful rally in technology stocks has taken hold across Europe. While the broader European economy struggles under the weight of the war in Iran, artificial intelligence companies have emerged as a massive bright spot for investors. The conflict in the Middle East has triggered a severe energy shock that has dampened economic growth and pushed the region’s overall stock market down. Yet, European technology shares completely defied this economic gloom, quietly rising 10% since late February to reach their highest levels since the year 2000.
This hidden stock market boom is driving most of the positive returns across the continent. New research from London-based macro firm TS Lombard reveals that just two specific baskets of AI-related stocks accounted for more than two-thirds of all the positive performance in European equities over the last month and a half. While investors panic over high oil prices and slow economic growth, these select companies continue to post massive returns.
Davide Oneglia, the European and global macro director at TS Lombard, urged investors not to ignore these European winners. He explained that the performance of their custom European AI baskets since early April has matched the tech-heavy Nasdaq in the United States, sitting just a tiny step behind Taiwan’s booming stock market. He advised traders to look past the current macroeconomic chaos and focus on the companies actually generating wealth.
The first winning basket from TS Lombard focuses entirely on the semiconductor supply chain. This group has rallied by roughly 20% since the start of April. It includes major European chipmakers and equipment suppliers such as ASML, Infineon Technologies, and STMicroelectronics. These companies benefit directly from the massive global push to build more advanced processors, as tech giants worldwide scramble to secure their hardware supplies.
The second successful basket tracks the physical infrastructure needed to keep artificial intelligence systems running. This group of stocks has surged by about 22% since early April. It includes companies that build data centers and manufacture heavy electrical equipment, such as France’s Schneider Electric and Italy’s cable manufacturing giant Prysmian. These infrastructure firms are securing massive contracts as corporations build out the power grids and facilities required to run advanced computer models.
Compared with global tech hubs, these European gains still look somewhat modest. Data compiled by LSEG shows that South Korea’s stock market surged by an incredible 55% during the same period, driven by a massive boom in memory chips. Meanwhile, the Nasdaq-100 gained roughly 21%, and Taiwanese technology stocks rallied about 28%. Still, Europe’s performance proves that the AI boom is not just an American or Asian phenomenon.
A massive wave of positive corporate earnings from the United States helped reignite this global tech rally. In early April, spectacular financial results from major chipmakers like Nvidia proved to investors that corporate spending on artificial intelligence remains incredibly strong. This renewed confidence quickly trickled across the Atlantic, boosting the share prices of European suppliers that provide key parts and power systems for these global projects.
Professional money managers also notice a wider strategic shift happening across Europe. Seema Shah, the chief global strategist at Principal Asset Management, which manages about $578 billion in assets, pointed out that Europe has quietly renewed its focus on innovation over the last two years. She explained that the continent is actively investing in defense, energy security, and advanced technology infrastructure to protect its economic future.
This strong tech performance stands in stark contrast to the rest of the European economy. The war in Iran, which began on February 28, continues to cause severe pain for traditional businesses. Fresh economic data showed that Eurozone economic activity declined in May at its sharpest rate in more than two and a half years. The energy shock has paused popular trade strategies and left the broader Stoxx Europe 600 index down just over 2% since the conflict broke out.
However, European tech stocks offer one massive advantage over their American rivals: they are significantly cheaper to buy. The European tech sector currently trades at almost 28 times its expected earnings. While this multiple sits near its highest point since 2008, it remains much cheaper than the Nasdaq in the United States, which currently trades at a much pricier 35 times expected earnings. This lower price tag makes European AI winners highly attractive to value-seeking investors.
As the conflict in the Middle East continues to cloud the global economic outlook, the gap between technology and traditional industries will likely grow wider. European factories and retail shops may struggle with high energy bills and slow growth, but the companies building the digital future have a completely different path. For investors willing to look past the immediate geopolitical chaos, Europe’s quiet technology leaders offer a powerful way to profit from the ongoing global artificial intelligence revolution.
