European AI Stocks Defy Geopolitical Gloom Amid Iran War

Despite a darkening backdrop for European equity markets caused by the energy shock of the Iran war, the region’s tech sector is experiencing a massive, under-the-radar rally. While the conflict has dampened overall economic growth and caused the broader STOXX 600 index to drop just over 2% since late February, European tech shares have surged 10%, hitting their highest levels since 2000. Data indicates that euro zone economic activity fell sharply in May, yet AI-related baskets have accounted for over two-thirds of the positive performance in European stocks over the past month and a half.

Research from TS Lombard highlights two specific European AI baskets that are performing on par with the Nasdaq. The first basket, consisting of semiconductor supply chain firms like ASML, Infineon, and STMicroelectronics, has rallied by roughly 20% since the start of April. The second basket, which focuses on AI infrastructure buildout firms like Schneider Electric and Prysmian, has jumped around 22%. This surge was reignited globally in April as strong tech earnings, including Nvidia’s recent stellar revenue report, reassured investors that corporate spending plans on AI remain highly robust.

Analysts suggest this tech rally has further room to run, reinforced by a secular push toward innovation, defense, and energy security. Furthermore, European tech stocks present an attractive valuation advantage, trading at almost 28 times expected earnings compared to nearly 35 times for their U.S. competitors on the Nasdaq. Although the tech sector only makes up about 10% of the heavily financial- and industrial-dominated European benchmark, its resilience proves that looking through the current macroeconomic chaos reveals significant regional winners.

Pic courtesy: google/ images are subject to copyright