Key Takeaways
- The AI rally has investors looking beyond the US and Asia to Europe.
- Mega gains for semiconductor and data center stocks, including chipmaker STMicroelectronics and data center operator Nebius, have pushed Europe’s tech sector higher.
- Investors and analysts say Europe looks attractive as an AI infrastructure play, though valuation concerns remain.
Insatiable appetite for the artificial intelligence boom has investors looking beyond US and Asian heavyweights to a handful of European hopefuls, sparking massive share gains.
Shares of German semiconductor equipment maker Aixtron AIXA have surged 240% so far this year on soaring AI demand. Dutch chip firm STMicroelectronics STMMI and data center operator Nebius NBIS have both risen 170%. Elsewhere, Nokia NOKIA, now in the cloud services hardware business, is up 140%, and BE Semiconductors BESI has added 115%.
Some small- and mid-cap European AI names have made even greater gains. French fabless semiconductor firm Kalray ALKAL has risen over 900%. Soitec SOI, which produces chip materials, is up around 730%. Industry peers Riber ALRIB and AT&S ATS are both up close to 350%.
“Europe, I think, is viewed as a bit of a growth opportunity. It can’t all be done in the US,” says Rob Thummel, senior portfolio manager at Kansas-based Tortoise Capital Advisors, which invested in Nebius late last year. The stock is up 400% in the past 12 months.
The ramp-up comes as investors explore opportunities outside of Europe’s few most recognizable tech players, such as ASML and Infineon—up 40% and 85% this year, respectively. “It is already well-known that ASML and other chip equipment peers will grow double-digit in 2026, 2027, [and beyond],” says Morningstar senior equity analyst Javier Correonero. “Many sub-niches of the semi space remain in a shortage situation where demand [outweighs] supply.”
RBC Bluebay senior analyst Esther Krukowski agrees, noting that European AI stocks currently benefit from “scarcity” value: “Solid results and improving earnings visibility from European ‘AI enabling’ hardware stocks have driven significant share price appreciation.”
Picks and Shovels Drive European AI Investment
“Europe has two key ways to play AI,” Correonero explains. The first is via equipment providers, such as ASML and BE, while the second is through analog chip players like STMicroelectronics and Infineon, whose complex power semiconductors will be critical for upgrading data centers to 800-volt power architecture.
Brian Colello, senior equity analyst at Morningstar, thinks this fundamental approach looks set to continue through the first phase of the AI buildout. “Picks and shovels are the clear AI winners to date, given all the spending. Software and AI users are a bit more vague and difficult to identify at the moment, but over time, there will certainly be winners that develop AI-based products too,” he says.
Tech is the top-performing sector in the Europe Market Index so far this year after energy, which outperformed amid rising oil shortages due to the Iran war. Research from TS Lombard shows two baskets of AI-related shares account for more than two-thirds of the positive performance in European stocks over the past month and a half.
Europe is considered fertile ground for the AI buildout, with its solid and increasing access to renewable energy, favorable climate—particularly in Northern Europe—and international connectivity. Tortoise’s Thummel says those attributes align well with his firm’s AI strategy: “Our approach has not been to invest in the companies that develop AI, but instead to invest in the infrastructure. Coreweave has done that here in the US; Nebius has done that in Europe. When you look at the AI race, it comes down to data, technology, and energy.”
Indeed, energy and utilities stocks have also pushed higher this year, in part thanks to the AI rush. Shares of Siemens Energy and Schneider Electric—both key players in the data center buildout—are up 40% and 10% so far in 2026, respectively.
Valuation Risks Loom
Despite the anticipated growth prospects, some analysts have expressed concern about the rapid rally in key European AI stocks. “They are all fairly valued or overvalued at this point, even though we have raised our fair value estimates substantially in the last six months,” Correonero says of AI equipment providers such as BE and ASML. BE is trading 52% above its fair value estimate, while ASML is in line. Both companies have wide economic moats.
Nebius is trading 83% above its fair value estimate and has no moat rating, meaning our analysts do not believe it has a durable competitive advantage. Nokia trades at a 63% premium and also has no moat, while Soitec has a narrow moat and trades at a 297% premium.
Those high valuations come amid concerns about an AI bubble. “The synchronized global parabolic moves in AI-related stocks have heightened bubble fears,” Krukowski says, noting that frothy valuations and supply chain concerns could yet spark volatility and tame the recent rally. However, with equity valuations still below previous bubble peaks and AI stocks offering superior earnings growth potential versus other sectors, “a correction may be regarded as a buy-the-dip opportunity.”
