Europe's AI stocks shine through gloom of Iran war

• Two TS Lombard AI stock baskets (semiconductors and AI infrastructure) each gained 20-22% since April, on par with Nasdaq's 21% rise, while Europe's STOXX 600 fell 2% since the Iran war began February 28
• European tech stocks outperforming despite eurozone economic activity contracting at the fastest pace in over 2.5 years in May due to energy shock from Iran conflict
• Tech represents only 10% of European benchmark index, with gains driven by companies like ASML, Infineon, Schneider Electric, and renewed European focus on AI infrastructure investment

European AI Stocks Rally Despite Iran War Market Turmoil

European artificial intelligence stocks have surged approximately 20-22% since early April, matching Nasdaq performance despite broader market weakness caused by the Iran war's economic impact on the region.

Key Performance Data

Two AI-focused stock baskets tracked by TS Lombard have significantly outperformed:

• Semiconductor supply chain basket: Up ~20% since April, including ASML, Infineon, and STMicroelectronics
• AI infrastructure basket: Up ~22%, featuring Schneider Electric and Prysmian in data center buildout

European tech stocks rose 20% over the same period, while the Nasdaq 100 gained 21% and Taiwanese stocks rallied 28%.

Market Context

The strong tech performance contrasts sharply with Europe's broader market struggles. The STOXX 600 index has fallen 2% since the Iran war began February 28, while eurozone economic activity contracted at its fastest pace in over 2.5 years in May due to energy shocks.

European tech has gained 2% since the war's start, despite comprising only 10% of the benchmark index dominated by financials, industrials, and healthcare.

Outlook

Analysts see further upside potential, citing:

• Europe's renewed focus on innovation in defense, energy security, and AI infrastructure
• Increased capital expenditure in strategic tech sectors
• Strong U.S. tech earnings (Nvidia beat Q1 expectations)
• European AI stocks still trading at discounted valuations versus U.S. peers

Principal Asset Management ($578 billion AUM) notes these secular themes have strengthened amid the conflict. TS Lombard advises investors to "look through macro chaos" and focus on European AI winners.