Goldman Sachs projects European stock outperformance
Investment bank Goldman Sachs has identified Europe as a region poised for significant European stock outperformance in the coming period. This projection comes as the global artificial intelligence (AI) trade shows signs of faltering. A global-strategy paper from Goldman, published on Monday, May 17, 2024, highlights a strategic pivot for investors seeking diversification away from volatile U.S. tech stocks.
The analysis suggests that Europe’s historical lag in the AI boom, which saw it benefit less from the explosive growth seen in recent years, now positions it uniquely. This relative underperformance could transform into an advantage, offering a less sensitive exposure to the ‘AI factor’ that has dominated markets.
Understanding European stock outperformance
Europe’s stock market is demonstrating resilience where others are struggling. The Stoxx 600 index recorded a 2% average return during eight major short-term AI trade corrections since 2023. This performance contrasts sharply with the S&P 500, which fell by 4% in similar periods, and a broader AI stock basket that plunged 19%. This resilience is a key factor in Goldman’s optimistic outlook for the region.
Analysts point to Europe’s lower sensitivity to the ‘AI factor’ compared to its American counterpart. The S&P 500’s sensitivity is three times greater than the European benchmark, making European assets a potential hedge against further tech sector turbulence. This structural difference offers a compelling argument for diversification.
Unpacking the AI trade’s current wobbles
The global equity markets have recently experienced notable instability, largely due to a downturn in the once-exuberant AI sector. In the week prior to November 9, 2026, global equities collectively fell by 2.7%. Technology stocks, which had been the darlings of the market, saw a sharp decline of 8.3%.
This significant drop stems from aggressive deleveraging activities in crowded AI investment positions. Concerns over inflated valuations within the technology sector, particularly among AI-focused firms, have led investors to pull back. The Nasdaq Composite and S&P 500 also saw substantial declines earlier in November 2026, further indicating a shift in market sentiment.
The Philadelphia Semiconductor Index, a critical barometer for AI-related hardware investments, particularly felt the pinch. It registered a 12.1% drop in a single week, marking its most significant weekly loss since April 2025. By Thursday, it had fallen 38.4% from its peak in June, underscoring the fragility of this once-booming segment.
These market movements reflect a broader rotation of capital, with investors moving away from high-growth AI stocks towards other sectors and regions. This re-evaluation of risk and return profiles is reshaping investment strategies globally. For example, the news earlier this month regarding the ongoing investigation into Nvidia CEO investigation highlights the scrutiny facing major players in the AI space.
Goldman Sachs’s recommended European plays
The Goldman Sachs report, spearheaded by analyst Guillaume Jaisson, specifies several categories of European companies poised for growth. These recommendations provide investors with concrete avenues to capitalize on the region’s emerging strength. The focus is on firms that either facilitate AI infrastructure, generate revenue directly from AI, or stand to benefit from long-term productivity improvements through automation.
For AI infrastructure, the report highlights major players such as ASML (ASML), Siemens (XE:SIE), Iberdrola (ES:IBE), and Vinci (FR:DG). These companies are fundamental to building the technological backbone required for AI expansion. Their established market positions and critical roles make them attractive in the current climate.
In the AI revenue generation cohort, Goldman Sachs points to Prosus (NL:PRX), RELX (UK:REL), and SAP (XE:SAP). These firms are actively developing and deploying AI-driven products and services, directly profiting from the technology’s application across various industries. Their ability to monetize AI solutions positions them favorably.
Furthermore, the report identifies several long-term productivity beneficiaries from AI adoption. This includes financial institutions like Barclays (UK:BARC) and Deutsche Bank, alongside the chemicals company Croda (UK:CRDA). Tech stocks such as Capgemini (UK:0HAZ) and Sage (UK:SGE), and insurers Zurich (CH:ZURN) and Admiral (UK:ADM) are also named. These diverse sectors underscore the wide-ranging impact of AI on operational efficiency.
The transformative potential of European automation
Goldman Sachs’s analysis delves into the profound impact AI-driven automation could have on the European economy, particularly in addressing long-standing structural challenges. The report calculates that a significant portion of the Stoxx 600’s wage bill, approximately one-third, is susceptible to automation. Successful implementation could boost corporate earnings by as much as 24%.
This potential for increased earnings per share (EPS) highlights a crucial element of Europe’s investment appeal. Despite the region facing historical issues such as labor shortages and rigid labor markets, AI offers a pathway to unlock substantial productivity improvements. The adoption of automation technologies can streamline operations and reduce costs across various industries.
The European AI Phase 2 Screen, a Goldman Sachs metric tracking AI-exposed companies, has seen a 14% reduction from its summer high. This has decreased its forward price-to-earnings ratio from 23 times to a more attractive 18 times. This de-rating occurred despite consensus expectations for a robust 20% EPS growth in 2027.
Similarly, European software stocks have experienced a de-rating, even with their resilient fundamentals. This suggests that the market may be overlooking their intrinsic value and future growth prospects in an environment of increasing AI integration.
The long-term AI beneficiaries screen by Goldman Sachs implies a potential 45% EPS upside for companies with substantial AI automation exposure, though the timing and scale of these gains, along with implementation risks, remain key considerations.
Navigating global markets amid shifting tides
The re-evaluation of AI investments and the subsequent market rotation extend beyond Europe, influencing global financial landscapes. The week concluding on Friday, November 6, saw Europe emerge as the sole region to maintain positive returns, a stark contrast to widespread declines elsewhere. This underscores the region’s relative stability in a volatile environment.
Other sectors also experienced significant shifts; energy stocks plummeted by 10.2% as crude oil prices, particularly Brent crude, fell by 16.4%. This broad market movement further illustrates the diverse factors at play beyond just the AI narrative. Gold, often seen as a safe-haven asset, gained 4.3% during the same week, signaling investor caution.
Goldman Sachs’s own Risk Appetite Indicator has continued its downward trend, suggesting a decrease in overall investor confidence and a substantial unwind in momentum strategies. This indicates a period where fundamental value and diversification are becoming increasingly important. As the AI hype cycle potentially cools, traditional metrics and broader economic factors are reasserting their influence on market direction.
The global financial community continues to grapple with various headwinds, including persistent geopolitical tensions and the potential for policy shocks. Concerns surrounding inflation and the trajectory of interest rates also remain significant factors for markets worldwide.
These elements combine to create a complex and uncertain outlook, making strategic diversification, as suggested by Goldman Sachs for Europe, a compelling proposition. Furthermore, ongoing technological advancements continue to reshape the financial landscape, such as Solana’s new trading app for tokenized stocks, indicating a dynamic environment for investors.