European Investors Urge AI Companies to Show Quick Returns Amid Rising Pressure
European investors are growing increasingly impatient with AI companies that have spent heavily on generative artificial intelligence without delivering tangible returns. After a market boom fueled by AI hype, these investors expect to see results by next year or risk losing interest. Recent concerns about a potential recession, coupled with the launch of the DeepSeek AI model, have dampened enthusiasm for AI stocks. As a result, investors are now scrutinizing AI adopters, like RELX and SAP, over those supplying hardware, such as Nvidia and chip equipment makers, who have also felt the impact of the market shift.
The downturn in AI-exposed stocks reflects a broader concern as recession fears mount. Stocks of hardware providers, including ASM International and BE Semiconductor, have experienced significant losses, while the performance of AI adopters has shown resilience. Despite some losses, companies like SAP and RELX have fared better, with SAP even overtaking Novo Nordisk as Europe’s most valuable company. The market’s shift in preference is evident as investors now focus more on firms benefiting directly from AI technology rather than those facilitating its development.
While the potential for AI to enhance productivity and profits remains high, investors are becoming more selective. According to experts, companies must prove that their AI investments will yield returns in the short term. Long-term prospects are still positive, but with the growing caution from investors, there is pressure on companies to justify their spending sooner rather than later. Some analysts have expressed concerns that the market will lose patience with unprofitable AI ventures if returns are not seen soon.
In an internal survey by Fidelity, a majority of analysts expressed skepticism about AI’s immediate profitability, with many expecting its effects to be more evident in the longer term. European portfolio managers echo this sentiment, emphasizing the need for AI companies to start showing financial gains. As the clock ticks, companies that fail to demonstrate the financial benefits of their AI investments could find themselves facing a cooler reception from the market.
source: reuters