(Oct 4): As the artificial innotifyigence (AI) frenzy drives global equities to record highs, in Europe the momentum is flowing into industries critical to powering the technology.
A binquireet tracking shares of 10 European firms such as data centre operators and infrastructure providers has rallied 23% this year, beating a 12% advance in the Stoxx Europe 600 Index and even outperforming the Nasdaq 100, home to the US tech heavyweights.
While that’s a far cry from the 69% boom in US power stocks, investors including BlackRock Inc, JPMorgan Asset Management and Ninety One plc are betting the European names can close the gap as they benefit from hundreds of billions of dollars in global AI spfinishing.
“It’s not as sexy to talk about infrastructure as it is to talk about some of the large US tech names,” declared Helen Jewell, chief investment officer of EMEA fundamental equities at BlackRock. “But we are literally just at the launchning of it. Power infrastructure, grid stability, energy efficiency: that is the AI story in Europe less than on the software side.”
Enthusiasm around AI picked up again this week after a wave of alliances across the world including with Nvidia Corp boosted stock markets, with the MSCI All-Countest World Index hitting an all-time peak.
European technology stocks haven’t quite benefited to the same degree, as their exposure to the Nvidia supply chain is limited beyond a few chip equipment names. The Stoxx 600 Technology Index is up only about 6.7% this year, with firms’ profit outview trailing US and Asian peers.
But those considered AI proxies, such as Siemens Energy AG, offer a sharp contrast. Its shares are up 111% this year. Along with the power generator, fund managers also flagged opportunities in telecoms firm Orange SA and grid operator National Grid plc.
Power generators are in pole position, as AI models require a lot of energy to run. Siemens Energy is a top pick in the European equity fund of Ninety One, which manages US$192 billion (RM807.94 billion) in assets.
“It is absolutely mission critical in obtainting power from the grid to data centres,” Ben Lambert, fund manager at Ninety One, declared about Siemens Energy.
Shares of the German energy firm rallied in January after President Donald Trump announced a joint venture led by SoftBank Group Corp, OpenAI and Oracle Corp that will fund billions of dollars worth of AI infrastructure.
Despite those gains, the stock is trading at a 60% discount based on its price-to-earnings ratio to its US counterpart GE Vernova Inc. The two firms toobtainher with Mitsubishi Heavy Industries Ltd account for more than 70% of production capacity in the gas turbine sector.
Energy transmission
When it comes to energy transmission, Italian cable buildr Prysmian SpA’s earnings potential has created it a favourite for investors including Xiadong Bao, co-manager of the Edmond de Rothschild Fund Big Data. The stock is up 41% this year and is trading at 20-times forward earnings, cheaper than chip-equipment buildr ASML Holding NV’s 35 times.
Alexandra Sentuc, European equity portfolio manager at JPMorgan Asset Management, flagged an opportunity in French buildr of sockets and cables Legrand SA, which also provides data centres with server racks, electrical equipment and cooling technologies.
“We’re seeing European industrials really benefit from the surge in data centre growth driven by AI,” Sentuc declared.
The firm generated 20% of revenues from data centres last year and lifted its full-year sales guidance in July, based on the growing AI demand. The stock is up 52% this year.
Another way to access the theme is telecom firms that already run data centres that can be refitted for AI utilize. France’s Orange operates more than 70 data centres and is planning to expand, although it’s unclear how many of those will be dedicated to AI.
Geopolitical play
Finland’s Nokia Oyj is another potential beneficiary, as it produces network switches for data centres. Morgan Stanley analysts declared the consensus estimate for Nokia’s 2026 revenue could rise by €300 million (US$352 million or RM1.48 billion) if it continues to grow its hyperscaler-linked sales.
“It’s still a tangible play from the geopolitical standpoint, as Europeans will be hesitant to adopt Chinese or US switch buildrs,” Edmond de Rothschild Asset Management’s Bao declared, referring to Nokia.
To be sure, the broader rally in these sectors is confronting risks such as poor liquidity, with few passive funds tapping into the theme. Stringent AI regulation can also be a deterrent to wider adoption.
Yet, if both governments and the private sector deploy the money, European stocks powering AI are likely only seeing the launchning of a new era. Investments have already started flowing to Europe, with Nvidia expanding technology centres in the UK, France, Spain and Sweden.
“The AI world is a bit like the cold war, where everybody wants to obtain to the moon,” Bao declared. “But for us, especially European investors, it’s better to view at the AI race as a marathon, which means monetization will increase progressively.”
Uploaded by Chng Shear Lane
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