Europe’s hunt for AI stocks leads to power suppliers and banks

Published Sun, Jun 28, 2026 · 08:41 PM

INVESTORS who want additional exposure to artificial intelligence in Europe are getting creative, searching out companies that enable the technology or stand to benefit from it as the usual suspects get more pricey.

While markets in the US and Asia are chock full of AI and memory chip stocks, there are only a handful in Europe. Relatively limited liquidity means those trades are crowded, and as valuations move higher, investors are looking for other ways to ride the world’s most important trade. 

The hunt leads them to companies that are heavy users of AI, such as banks, as well as firms that sell to hyperscalers, such as energy and infrastructure providers. That’s proved a good strategy in a week where scepticism about high AI valuations rattled the biggest US tech stocks.

“I’m taking the view that hyperscalers’ capital expenditure is someone else’s sales,” said Stephane Deo, senior portfolio manager at Eleva Capital, adding that in Europe, the opportunity is in “the classic pick and shovel trade”.

The trend is powered by the simple fact that Europe lacks a deep bench of large-cap technology names to play the AI theme. The weight of the tech sector in the Stoxx 600 is just 9 per cent versus 44 per cent for the S&P 500. That drops to 6 per cent when looking at the semiconductor industry, compared with 19 per cent for the S&P 500. 

Electrification and power supply are go-to trades. The European Union is offering over 800 billion euros (US$912 billion) in grants for decarbonisation and power supply improvements, while Germany has a 500-billion-euro fiscal package of its own. France’s Schneider Electric has risen 28 per cent in the past year, Italy’s Prysmian has surged about 150 per cent and Siemens Energy jumped about 66 per cent. 

ABB, a Swiss company whose power distribution is used in Microsoft Corp data centres, is another beneficiary. The stock has gained 84 per cent over the past year, and the firm is working with Nvidia on next-generation 800-volt direct current architecture for gigawatt-scale facilities. 

“Nvidia gets the headlines, ABB gets the purchase orders,” Calibrate Management founder Michela Ferrulli said on Wednesday at the Sohn Monaco conference. 

These stocks have another appeal: they’re cheap. The forward price-to-earnings ratio for the MSCI Europe Semiconductor Index surged to 45 earlier this month, the highest level since the global financial crisis. By contrast, valuations for industrial stocks exposed to AI are around 30 times forward earnings, while adopters trade at a small discount to the broader market, at below 15. 

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Investors are now turning to adopters, and trying to figure out which companies will get the biggest profit boost from productivity gains and smaller workforces. One sector in particular is emerging as a winner: banks.  

Morgan Stanley estimates that AI will boost productivity at banks by up to 50 per cent over the next five to 10 years. Banco Santander has set a goal of generating more than one billion euros in business value from AI between 2026 and 2028 through additional revenue and cost reductions. HSBC Holdings expects to enable over 200 new AI use cases over the next two years.

Lenders “appear more and more as being among the main beneficiaries of AI for cost reduction”, according to Gilles Guibout, head of equities at BNP Paribas Asset Management.

There are some pure AI plays in Europe. Stocks that are involved in building massive computing capacities in data centres have attracted attention. Soitec in France has posted triple-digit gains this year, but photonics remains a niche mid-cap segment with limited liquidity and high volatility.

Meanwhile, core semiconductor plays such as ASML Holding and BE Semiconductor Industries remain must-have stocks when it comes to AI, but that space is overcrowded, said Jean-Marc Delfieux, head of equities at Tikehau Capital. “They’ve become expensive, actually very expensive, so we have started to trim our positions.” 

Going beyond the obvious winners paid off last week, when market volatility surged, and investors sold core AI stocks as doubts emerged over excessive crowding and lofty long-term expectations. On the other hand, a UBS Group basket of European AI adopters rose nearly 2 per cent.

This could even be Europe’s AI moment, according to Citigroup strategists led by Beata Manthey. They see industrials, health care, IT, telecoms and financials stocks as potential beneficiaries of AI productivity enhancements. 

“The global AI trade has turned more nuanced this year,” they said. “The key question is now whether the AI trade will apply a selective lens on companies most effectively adopting AI.” BLOOMBERG