A rally in European technology stocks has continued largely unnoticed as broader equity markets across the region struggle under the weight of the Iran war and slowing economic activity.
The conflict has disrupted so-called Make Europe Great Again trades, with European shares expected to lag behind their US counterparts as long as geopolitical tensions persist.
Data showed euro zone economic activity declined in May at its fastest pace in more than two-and-a-half years.
Despite the difficult macroeconomic backdrop, AI-linked companies have emerged as a bright spot for investors.
AI-linked shares drive European market gains
Research from TS Lombard showed that two baskets of AI-related stocks accounted for more than two-thirds of the positive performance in European equities over the past month and a half.
“The performance of our EU AI baskets since April is on par with the Nasdaq, just a touch behind Taiwan,” said Davide Oneglia, as cited in a Reuters report.
One of TS Lombard’s AI baskets, focused on semiconductor supply chain companies, has climbed roughly 20% since the beginning of April.
The basket includes firms such as ASML, Infineon Technologies, and STMicroelectronics.
Another basket, which has risen around 22%, is linked to AI infrastructure development.
It includes companies involved in data centres and power infrastructure, such as Schneider Electric and Prysmian.
European tech performs in line with Nasdaq
European technology stocks have broadly matched the performance of the Nasdaq since April, even as gains remained below those seen in some Asian markets.
According to LSEG data, South Korea’s stock market surged 55% during the same period.
TS Lombard’s report showed the Nasdaq 100 gained roughly 21%, while Taiwanese shares climbed about 28%.
The renewed focus on artificial intelligence has been supported by strong earnings from major US technology companies since early April.
Investors have also responded positively to Europe’s efforts to strengthen technology infrastructure.
AI infrastructure spending seen as long-term theme
Seema Shah, whose firm manages around $578 billion, said Europe’s emphasis on innovation has become more visible over the last two years, particularly in defence, energy security, and AI infrastructure.
Even after recent gains, European technology shares continue to trade at lower valuations than their US peers.
The European technology sub-index trades at nearly 28 times expected earnings, compared with almost 35 times for the Nasdaq.
Oneglia said his analysis focused on the period after April because that was when enthusiasm around AI re-emerged globally.
Investors also reassessed concerns over whether spending on artificial intelligence had become excessive.
NVIDIA earnings add to optimism
Fresh optimism around the AI sector was further supported after Nvidia reported first-quarter revenue on Wednesday that exceeded Wall Street expectations.
While Europe’s STOXX Europe 600 index has declined just over 2% since the Iran war began on February 28, the region’s technology shares have risen 10% during the same period.
European tech stocks this week also reached their highest level since 2000, highlighting continued investor appetite for AI-related companies despite wider economic uncertainty.
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