From Yahoo Finance: 2025-03-26 01:03:00

European companies investing heavily in generative artificial intelligence must show returns by next year to satisfy investors. Stocks in the AI sector have been affected by economic concerns and the launch of the low-cost Chinese AI model DeepSeek. Investors are favoring companies adopting AI technology over hardware suppliers.

Chipmaker Nvidia, despite challenges from DeepSeek, has seen a 29% increase in stock value. European AI-exposed stocks are fewer but following a clear trend. Hardware makers like ASM International and BE Semiconductor have experienced declines, while AI adopters like LSEG and RELX have seen smaller decreases.

Investors are growing impatient with companies investing in AI without visible returns. Fidelity analysts expect AI to have a positive impact in five years, but European portfolio managers anticipate results sooner. Companies adopting AI must show significant impact on their top lines by 2026 to maintain investor interest.

The biggest risk in AI investment is the emergence of viable use cases that consumers are willing to pay for. European AI plays are already at a premium, but tangible benefits like increased top line and margins are necessary to justify high valuations. This year may see widespread reassessment of AI investments based on actual outcomes.

Read more: Analysis-European investors say clock is ticking for AI adopters to deliver