While the broader European equity market has struggled under the weight of the Iran war and its ensuing energy shock, a quieter and far more interesting story has been unfolding in the tech sector. Since early April, shares tied to artificial intelligence have posted surprisingly strong gains, largely escaping the notice of investors preoccupied with macroeconomic gloom. The conflict has effectively pressed pause on what some had called the “Make Europe Great Again” trade, and recent data showing euro zone economic activity falling at its sharpest rate in more than two and a half years has only deepened the sense of caution. Yet within that fragile landscape, two specific baskets of AI-related stocks have accounted for more than two-thirds of the positive performance seen in European equities over the past six weeks.
That finding comes from research by TS Lombard, where Davide Oneglia, director of European and global macro, put it this way: “The performance of our EU AI baskets since April is on par with the Nasdaq, just a touch behind Taiwan.” He went on to urge investors to “look through macro chaos and don’t ignore European AI winners.” That is a striking observation, especially given how the broader STOXX 600 index has fallen just over two percent since the Iran war began in late February, while European tech shares have surged ten percent and recently hit their highest level since the year 2000.
One of the TS Lombard baskets focuses on companies in the semiconductor supply chain, including well-known names like ASML, Infineon, and STMicroelectronics. That group has rallied roughly twenty percent since the start of April. The second basket, up around twenty-two percent, includes firms involved in the AI infrastructure buildout, particularly data centres. Here, names like Schneider Electric and Italy’s Prysmian stand out. What makes these gains even more compelling is that they have brought European tech performance largely in line with the Nasdaq 100, which has risen roughly twenty-one percent over the same period. Only Taiwan and South Korea have seen sharper rallies, with the latter up fifty-five percent.
When you step back, it becomes clear that European AI stocks are not just enjoying a fleeting moment of optimism. A renewed global focus on artificial intelligence, reinforced by strong US tech earnings since early April, has played a major role. Investors have revised their earlier doubts about whether corporate spending on AI was becoming excessive. Instead, the prevailing view now seems to be that the buildout has only just begun. At the same time, Europe itself has started to push more seriously for technological self-reliance, particularly in defence, energy security, and AI infrastructure. Seema Shah, chief global strategist at Principal Asset Management, which oversees roughly five hundred and seventy-eight billion dollars, noted that this shift has been quietly underway for the last two years. In her words: “You are seeing capital expenditure into those areas. We do think that those kinds of secular themes have remained pretty strong and probably have been actually reinforced by the conflict.”
That last point is worth pausing over. War is rarely good for markets, but in this case, the urgency to secure strategic technologies and reduce dependency on external supply chains may have actually accelerated investment in Europe’s own AI capabilities. There is a certain grim irony here: the same conflict that has depressed broader economic sentiment has also sharpened the continent’s focus on future-facing industries.
Another factor working in Europe’s favour is valuation. Even after the recent rally, European tech stocks remain cheaper than their US rivals. The European tech sub-index currently trades at nearly twenty-eight times expected earnings, compared to almost thirty-five times for the Nasdaq. That gap suggests there could still be room to run, especially if the AI theme continues to dominate investor conversations. And the conversation was further energised when US tech bellwether Nvidia released first-quarter revenue that beat Wall Street expectations, reminding everyone that the AI boom is far from over.
Still, it would be misleading to paint an entirely untroubled picture. The energy shock from the Iran war continues to dampen economic growth across the euro zone, and a prolonged conflict would inevitably pressure corporate profits across all sectors, including tech. Moreover, tech still makes up only about ten percent of the European market, so its strength, while impressive, is not enough to lift the entire region out of its malaise. There is also the open question of how sustainable the AI infrastructure buildout really is. Some analysts worry that a pullback in US capital spending, or a regulatory backlash in Europe, could cool the rally just as quickly as it ignited.
