European AI diversification drives 150% gains in power stocks as tech weighting lags at 9%

Europe’s hunt for artificial intelligence stocks is driving investors into unconventional territory, as the continent’s underweight technology sector forces a creative rotation into power suppliers, banks, and infrastructure plays. With the Stoxx 600’s tech weighting at a mere 9% versus the S&P 500’s 44%, and semiconductors specifically at 6% against 19% in the US, pure-play AI names are scarce and crowded. As valuations for the handful of European tech champions rise, fund managers are turning to what Eleva Capital’s Stephane Deo calls ‘the classic pick and shovel trade’—companies whose sales feed off hyperscaler capital expenditure. This strategy paid off handsomely in a week when skepticism over sky-high AI valuations rattled US mega-cap tech stocks. The electrification and power supply theme has become the go-to trade, underpinned by over €800 billion in EU grants for decarbonisation and power supply improvements, plus a separate €500 billion German fiscal package. These tailwinds have propelled French giant Schneider Electric up 28% over the past year, while Italy’s Prysmian has surged about 150%, Siemens Energy has jumped roughly 66%, and Swiss-based ABB, which supplies power distribution to Microsoft data centers and is collaborating with Nvidia on next-generation 800-volt direct current technology, has risen 84%. Beyond power, banks are emerging as another AI beneficiary, as heavy users of the technology in risk management, trading, and customer service, though specific performance metrics for lenders were not detailed in the reports. The trend illustrates a structural reality: Europe’s equity market, dominated by industrials, materials, and financials, is being re-rated as investors connect the dots between AI demand and the physical infrastructure required to support it. Hyperscalers’ projected data center buildouts—estimated to exceed $200 billion through 2027—are translating directly into order books for European engineering and electrical firms. This ‘someone else’s sales’ logic provides a defensive yet growth-oriented angle, as the capex cycle has multi-year visibility and is bolstered by government climate spending. The valuation argument is also compelling: while US AI chipmakers trade at premiums, European infrastructure firms often have diversified revenue streams and attractively lower multiples. However, risks include regulatory hurdles, potential fiscal consolidation, and the global trade tensions that could disrupt supply chains. The breadth of the theme is expanding, with investors now screening for companies that enable electrification of data centers, grid modernization, and even cooling technologies. As AI adoption accelerates across industries, the knock-on effects for Europe’s industrial base are profound, and the market is only beginning to price in the full scope of this transformation. Going forward, the interplay between US tech earnings and European industrial orders will be a key metric to watch, as any slowdown in hyperscaler spending could quickly reverse these gains. For now, the ‘pick and shovel’ playbook, reminiscent of the gold rush, has given European equities a powerful AI narrative of their own—one that does not rely on a handful of overbought semiconductor names.